Data Access surprised the industry and silenced the skeptics by registering a
meteoric rise in revenues in the fiscal 2002—03. It netted a turnover of Rs
632 crore as against Rs 48 crore in the previous year, and increased its market
share in international long distance (ILD) services from nil to around 36
percent in a span of nine months.
Now, the company has ambitious plans of setting up a global clearinghouse (GCH).
Siddhartha Ray, managing director, Data Access, is aiming to make it a ‘global
Indian telecom company’, on the lines of Infosys and Wipro who have created a
niche for themselves in the software domain. In the calendar year 2003, the
company is looking at a turnover of Rs 3,000 crore, of which Rs 1,400 crore will
come from overseas operations.
For international telecom operations, the company is planning for a mix of
offshore as well as onshore architecture, much similar to a software model. The
switches will be placed in India, the UK, the US, and Hong Kong whereas back
office logistics and management (managing the switching system and billing) will
be controlled from India. All this will help in getting cost advantages for the
company.
In terms of investment, the company is planning to put in around Rs 200 crore
in 2003, of which Rs 150 crore will be invested in international operations.
Till date, the company has already invested around Rs 100 crore in terms of
equipment and real estate. Due to drop in prices of infrastructure equipment,
Data Access has the advantage of getting the equipment at one-fourth or
one-fifth of the earlier price. The company has also benefited in submarine
cables prices because of the glut in the market. This has helped the company to
build the infrastructure at one-fourth to one-fifth of the price of its
competitor.
The Clearinghouse Strategy
According to industry experts, the worldwide GCH market is estimated at
around 300 billion minutes per year. The market is big, and so is the number of
service providers. But it’s a fragmented market with AT&T and WorldCom
having double-digit market shares of around 20 percent and 13 percent
respectively and the rest being divided among a large number of players. In GCH,
the majority of players have single-digit market shares. Ray is aiming for 5
percent of the overall pie, which amounts to around 15 billion minutes per year
or 1,250 million minutes per month. That’s not an easy target by any means,
and Ray and his team are aware of this.
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So how is Data Access going to achieve its target?
The strategy is to go for the ‘low volume, high margin’ game and not the
other way round as has been the strategy of high-end operators like AT&T and
WorldCom. Therefore, Data Access is focusing at those geographies where margins
are high and where deregulation in ILD space is happening or is likely to
happen. Latin America, Central Asia, Russia, Middle East, and Africa are some of
them. In these geographies, margins are in the range of 20 cents per minute in
comparison to developing markets like Europe, China, and US where the margins
are in the range of around 1.5—3 cents per minute. It can be a very difficult
task for new operators to compete in these regions.
On the GCH front, the company will be buying and selling capacity to
operators in these countries and would also be interested in participating in
the ILD privatization process. "This will help the company spread its risk
in multiple markets," Ray elucidates. The company has already opted for
external gateway operator (EGO) in Sri Lanka and is eyeing for ILD operations in
Bangladesh, Saudi Arabia, Iran, Iraq, and UAE when the market opens up. In many
of the above markets, Data Access’ strategy is to partner with local partners.
The company has already done that in Sri Lanka.
The Infrastructure
For GCH operations, Data Access America Inc would be front-ending the
operations. All international operations are owned by Data Access America. At
present, Data Access America is having operations in the US, the UK, Sri Lanka,
and Hong Kong.
Data Access America is 100 percent owned by Data Access, a joint venture
between Spa Enterprises and PCCW. In the US, the company has set up a superpop
at Manhattan. In terms of infrastructure, the company has opted for Nortel DMS
GSP switch, Cisco routers, Vocaltec’s IP transport, and DCME (TDM transport)
of ECI Israel. The company has recruited around 20 people. The switch has a
capacity of 33 million minutes of voice call per day as it can handle 8 STM-1
traffic. Since the US has a good fiber backbone, the company has opted for four
traffic pick-up points there–Los Angeles, Florida, Denver, and New York–one
each in all the four time zones of the US. In terms of connectivity, the company
has gone for STM-4 link between New York and London, and Los Angeles and Hong
Kong. STM-1 links are available between New York and Los Angeles, New York and
Florida, and New York and Denver. In June, the company is planning to start DLD
services in the US and has plans to focus on carrier, enterprise, and consumer
segments.
In terms of infrastructure, Data Access has opted for the Nortel DMS GSP
switch and Juniper router. It has recruited around 15 people for the UK
operations, and has three pick-up points in Cyprus, Frankfurt, and London. In
terms of connectivity, the company has opted for STM-1 link between London and
Amsterdam, London and Cyprus, and London and Frankfurt.
Data Access Hong Kong is 100 percent owned by Data Access America Inc. In
terms of infrastructure, the company has opted for a smaller switch Nortel DMS
300 which can handle 9,000 circuits. It is planned to be commercial in June.
Data Access Lanka is a 51:49 joint venture between Ceylinco Consolidate and
Data Access America Inc. The company has got an external gateway operator (EGO)
license. In case of Data Access Lanka, the network switch is connected to Hong
Kong and London. In terms of ILD traffic, the Sri Lankan market is estimated at
400 million minutes per year. Data Access is planning to capture 150 million
minutes, according to Ray.
The company is planning to invest around $15—16 million over 12 months and
is planning to offer ILD services, prepaid services, and value-added services
like bridge number and video conferencing services.
Future Plan
"Data Access is also planning for an IPO worth $100 million in the US
market in the first quarter of 2004. The company is planning for two rounds of
funding–$30 million and $70 million. The IPO will be floated by Data Access
America Inc and will be utilized for buying fiber capacities. At present, we don’t
possess any fiber," Ray says. Once Data Access has its own fiber, the
company can lease fiber to different subsidiaries instead of buying fiber from
third party. All this will help the company consolidate its operations and move
at a fast pace in the international market.