CLEARINGHOUSE: Formula Quick Growth?

VoicenData Bureau
New Update

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


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


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.



want to make Data Access a global Indian telecom company, on the

lines of Infosys and Wipro"



managing director, Data Access

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


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.

Pravin Prashant