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YOU Broadband - Expanding its portfolio and subscriber base

December 15, 2009
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The broadband segment, a key focus area for the government and private operators alike, has grown at over 45 per cent year-on-year over the past few years, albeit on a small base. However, with broadband penetration currently at 7.44 million, much still remains to be done in order to achieve the government's target of 20 million broadband subscribers by 2010.

While the internet service provider (ISP) landscape in India is fragmented with over 150 ISPs, only a few of them dominate the market and together account for over 90 per cent of the market. Currently, the broadband market is dominated by state incumbents like Bharat Sanchar Nigam Limited and Mahanagar Telephone Nigam Limited, which account for about 90 per cent of the last mile copper loop, and by private telecom operators.

While this has made it difficult for stand-alone ISPs like YOU Broadband & Cable, to capture the market, the company, which uses cable modem technology, has managed to hold its own. A fledgling player, the company is currently the ninth largest broadband service provider in India with a market share of 1.42 per cent as of June 2009. Its closest competitors include Sify Technologies, Tata Communications and Hathway Cables. While the company's market share has come down over the past one year from 3.34 per cent to 1.42 per cent its subscriber base has grown in absolute terms by over 35 per cent from 146,486 in June 2008 to 199,193 in June 2009.

Background
YOU Broadband (formerly Iqara Telecom) is a Category A ISP that offers high speed internet, voice and video services to residential and corporate customers across 11 cities. The company has so far invested Rs 4 billion on broadband cable infrastructure, which includes 1,155 km of optic fibre and 4,000 km of last mile coaxial cable network, and has partnered with companies like Motorola, Avaya and Cisco.

Initially owned by British Gas, the company was sold to Citigroup Venture Capital in September 2006. Following a change in ownership, the company has undertaken several measures to strengthen its presence in the Indian market. In 2007, it acquired Ahmedabad-based ISP IceNet to enhance its VOIP offerings. The acquisition helped the company consolidate its presence in Ahmedabad, Vadodara and Rajkot. It also entered into a 50:50 joint venture with Malaysian WiFi player Red Snapper to expand its portfolio and provide wireless in the last mile to its customers.

While broadband remains the company's bread-and-butter business, it has also made a foray into the digital cable business with the acquisition of a 50 per cent stake in Bangalore's local cable network Digital Infotainment, in January 2008. In Mumbai too, it formed an alliance, YOU-SCOD 18, which enabled the company to capture 40 per cent of the cable business in the region. With these developments, YOU Broadband became a key multi-service operator with triple-play aspirations, that is, to offer data, voice and video services through the same cable. In this segment as well, the company faces stiff competition from companies like Big TV (Reliance Communications' digital TV service) and Airtel Digital TV.

Focus areas
The company has drawn up a multipronged strategy to expand its business over the next few years. In order to grow its revenues, which stood at Rs 1 billion in March 2009, it intends to focus on developing its last mile access and consolidate its operations in the 11 cities where it currently has a presence. While the company initially had plans to expand its operations to 15 additional cities, it has since downsized its plans and will be expanding to only six. As a fallout of the economic crisis, the company has also scaled down its planned investments to Rs 2.5 billion over the next two years, as opposed to Rs 4 billion planned earlier.

In order to capitalise on the vast unmet demand in the hinterland, YOU Broadband is establishing a chain of cyber cafes in nonmetro cities. Currently, the organised market for cyber cafes in India is dominated largely by players like Sify and Zapak.

Continuing with its strategy of forming alliances as part of its expansion plans, in March 2009, YOU Broadband entered into a partnership with Atom Technologies, a leading provider of m-payment solutions. Through this alliance, which will allow its customers to make payments over their phones, the ISP is expecting its top and bottom lines to be positively impacted.

For cable services too, the company will be adding two-three cities to its existing operations in Mumbai, Bangalore and Visakhapatnam. In terms of its service offering, SCOD 18, the company is considering expanding into other parts of Maharashtra, besides maintaining its dominant position in Mumbai, and focusing on digitisation and other value-added services such as on-demand and TV-commerce.

Besides these, the ISP has undertaken several other innovations on the technology front. For instance, it has deployed Cisco's cable modem technology which it is upgrading to DOCSIS 2.0 to offer greater bandwidth to its customers.

With an ambitious growth plan chalked out for the next few years, the company is looking at gaining a stronger foothold in the internet and broadband market and also diversifying its business. However, given the strong competition in these segments, it will be a Herculean task for the company to make exceptional progress.



 
 
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