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Viom Networks: Exploring new business opportunities

December 31, 2013
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Viom Networks, a joint venture between Tata Teleservices Limited (TTSL) and the Srei Group, has come a long way since its inception in 2009. With an asset portfolio of over 40,000 towers, Viom is the second largest independent tower company in the country after Indus Towers. Further, its tenancy of about 2.3x is the highest in the industry.

The company marked a major milestone in the past year by turning positive on profit after tax. It recorded its first profit in 2012-13. The earnings before interest, taxes, depreciation and amortisation (EBITDA) margin stood at 57 per cent (excluding energy costs) as of March 2013.

Even on the operational front, Viom seemed to have regained some momentum, which was affected by licence cancellation and the consequent exit of several clients from the Indian telecom space. In the past two years, the company has improved its tenancy risk profile significantly by shifting focus from new operators to incumbents, following which the share of new operators in the overall tenancy business reduced from 37 per cent in 2011-12 to about 25 per cent in September 2013. Meanwhile, the share of incumbent operators grew from about 21 per cent to 31 per cent during this period.

Viom has prepared a road map for the next 12-18 months, identifying the key focus areas that will drive the next level of growth. The company is also planning to list itself on an overseas stock exchange as well as explore the possibility of private equity placements to raise funds.

 Data services to drive tower expansion

The introduction of 3G/4G technologies has meant that the existing tower infrastructure is inadequate to support the growing data demand. As a result, operators are now undertaking greenfield as well as brownfield roll-outs to address the capacity crunch faced in several areas. Viom is banking on this growing data penetration and aims to add 10,000 to 15,000 towers in the next three years. The majority of these new towers are expected to be established in Tier I cities where the issue of network congestion is more prominent. Most of these sites will be in the form of urban infills – installing a smaller tower between two larger ones – to increase coverage. Moreover, with operators gearing up to acquire spectrum in the 1800 MHz band in the upcoming spectrum auctions, large-scale greenfield roll-outs can also be expected in the next two years.

 Exploring new business areas

In a bid to drive profitability and revenue growth, Viom has started looking at new businesses such as integrated data solutions, third-party managed solutions, in-building solutions, transmission and developing innovative services with towers as core assets. In July 2013, Viom Networks signed a seven-year contract to provide Wi-Fi services at the Chennai International Airport. The deal is reported to be worth Rs 200 million and would see Viom paying a licence fee of Rs 28.8 million annually. The company will develop back-end infrastructure at the airport and partner with operators for offering internet-based services. Viom already offers in-building solutions at airports in Mumbai and Delhi.

 Going international

Exploring global markets is also a part of the company’s strategy and Viom is seeking opportunities both in the data segment and managed services space, specifically in Asia and the Asia-Pacific. Managed services will bring in fee-based income for the company. Further, since most of the Asian telecom markets are similar to that in India, Viom has a fair chance of extending its Indian expertise to those markets. In fact, the company is in talks with Telenor for setting up and managing towers in Myanmar.

 Energy management

Managing energy costs, which currently constitute about a third of a telecom site’s opex, has become important. Increasing energy costs have made it impossible for infrastructure providers to continue with their traditional model of passing through power and fuel costs to telecom operators. Consequently, Viom, along with most other tower companies in India, are now working on a fixed-cost model, under which they will be responsible for end-to-end management of operators’ energy requirements. Besides, the company is turning to renewables and powering several towers on green energy.

 The way forward

As the Indian telecom industry heads towards consolidation – the number of operators has already reduced by over 25 per cent in many circles – the tower infrastructure space will not be able to sustain multiple players. Consequently, it will become important for players to rework their strategies and revise their business targets. Viom, with its strategy of becoming an end-to-end network service provider and exploring new business opportunities, is poised to emerge as a stronger player in the Indian infrastructure space in the coming years.

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