Managed services reap high margins for major telcos
26-12-2009
Outsourcing and offshoring are big money-spinners
Large telecom firms like Bharti Airtel, Tata Communications and Reliance, which have invested large amounts in building national and international fiber optic networks, have reaped high margins from managed enterprise services, which are also growing at a fast clip.
"The domestic market was worth $4 billion in 2008-09 and is expected to grow at a compounded annual growth rate of 23.8% till 2011-12" according to Nanditha Krishna, senior analyst ICT ? South Asia and Middle East, Frost and Sullivan.
Bharti Airtel earned a revenue of Rs 1510 crores (Rs.15.1 billion) from enterprise services to corporates in 2008-09, up from Rs 1264.5 crores the earlier year. For the second quarter of 2009-10, the company had an EBITDA (earnings before interest, taxes, depreciation and amortisation) of Rs 1102.3 crore for all enterprise-related services. This was a 5% increase from the June quarter. For the September quarter, EBITDA for this business accounted for 27% of the total EBITDA of the company. The corresponding number for the June quarter of 2009-10 was 25%.
Tata Communications' managed services revenues grew at a 70% compound annual growth rate between 2006-07 and 2008-09. The managed and enterprise services of Reliance Communications contributed to 40% of its total revenues in quarter ended September 2009, up from 34% in the quarter ended June 2009. The company did not provide break-up of revenues from its managed and enterprise services.
"There has been an increased growth in the outsourcing and offshoring industry, which predominantly relies on bandwidth for delivery and a host of bandwidth intensive applications" says Chris Tobit, director (enterprise services), Bharti Airtel.
Srinivasa Addepalli, senior VP (corporate strategy) of Tata Communications, says his company owns 50,000 kms of fibre network within the country and reaches out to 300,000 buildings apart from connecting India with the rest of the Asia Pacific region and Europe.
Likewise, Bharti Airtel, through its i2i and SEA-ME-WE 4 submarine cable systems, connects India to Singapore and Europe. Reliance Communications has more than 195,000 kilometre of fibre network in the country and over 65,000 km of submarine cable.
"As a company's locations grow, it becomes expensive and complex for it to manage its network. Hence outsourcing it makes sense" says Naresh Singh, principal analyst, Gartner. Carriers are providing several critical IT and communication applications too. For instance, the Reserve Bank of India uses dDos, a network security service from Tata Communications, that protects RBI's website from being hacked.
Inputs from Economic Times
Large telecom firms like Bharti Airtel, Tata Communications and Reliance, which have invested large amounts in building national and international fiber optic networks, have reaped high margins from managed enterprise services, which are also growing at a fast clip.
"The domestic market was worth $4 billion in 2008-09 and is expected to grow at a compounded annual growth rate of 23.8% till 2011-12" according to Nanditha Krishna, senior analyst ICT ? South Asia and Middle East, Frost and Sullivan.
Bharti Airtel earned a revenue of Rs 1510 crores (Rs.15.1 billion) from enterprise services to corporates in 2008-09, up from Rs 1264.5 crores the earlier year. For the second quarter of 2009-10, the company had an EBITDA (earnings before interest, taxes, depreciation and amortisation) of Rs 1102.3 crore for all enterprise-related services. This was a 5% increase from the June quarter. For the September quarter, EBITDA for this business accounted for 27% of the total EBITDA of the company. The corresponding number for the June quarter of 2009-10 was 25%.
Tata Communications' managed services revenues grew at a 70% compound annual growth rate between 2006-07 and 2008-09. The managed and enterprise services of Reliance Communications contributed to 40% of its total revenues in quarter ended September 2009, up from 34% in the quarter ended June 2009. The company did not provide break-up of revenues from its managed and enterprise services.
"There has been an increased growth in the outsourcing and offshoring industry, which predominantly relies on bandwidth for delivery and a host of bandwidth intensive applications" says Chris Tobit, director (enterprise services), Bharti Airtel.
Srinivasa Addepalli, senior VP (corporate strategy) of Tata Communications, says his company owns 50,000 kms of fibre network within the country and reaches out to 300,000 buildings apart from connecting India with the rest of the Asia Pacific region and Europe.
Likewise, Bharti Airtel, through its i2i and SEA-ME-WE 4 submarine cable systems, connects India to Singapore and Europe. Reliance Communications has more than 195,000 kilometre of fibre network in the country and over 65,000 km of submarine cable.
"As a company's locations grow, it becomes expensive and complex for it to manage its network. Hence outsourcing it makes sense" says Naresh Singh, principal analyst, Gartner. Carriers are providing several critical IT and communication applications too. For instance, the Reserve Bank of India uses dDos, a network security service from Tata Communications, that protects RBI's website from being hacked.
Inputs from Economic Times
