From being a diversified business, segmented into various divisions such as IT, telecom, software, BPO and KPO, GTL has virtually rebuilt itself over the past few years to emerge as a niche player in the telecom sector. The group’s operations today cater to two broad segments of the telecom sector: network services and infrastructure.
Background
Focused on too many businesses, its share price scraped the bottom of the barrel with market capitalisation falling from $2 billion to $50 million.
Redefining its business model, GTL began restructuring its business, exiting non-core areas and concentrating on the more important ones. The restructuring involved splitting GTL’s business into two ?? the network services company GTL and GTL Infrastructure Limited (GIL). GTL’s wholly owned subsidiary, GTL Technology Investments, was merged with GTL.
In November 2006, GIL emerged as an independent infrastructure company to provide passive telecom infrastructure including towers, shelter, air-conditioning equipment, diesel generator, battery, etc.to cellular operators. It was also listed on the Bombay and national stock exchanges.
GTL, which is focused on network engineering services, holds about 40 per cent equity in the tower business company (as of end-November 2007), with the balance 60 per cent being held by directors (over 1 per cent), Global Assets Holding Corporation (6.56 per cent), financial institutions (5.55 per cent), corporate bodies (4.32 per cent), overseas investors (33.68 per cent) and the public (8.88 per cent).
While GTL leased its call centre infrastructure to a third party, it sold its enterprise network and managed services business to Orange Business Services in July 2007. The deal with Orange fetched a sum of about Rs 2 billion.
Network business
GTL’s principal activities include the provision of network engineering and customer management solutions including enterprise networks, e-business infrastructure and software development. The products and services offered by the company include building complex voice and data networks for high-end turnkey telecom networks of service providers and utilities in India and overseas.
GTL aims to be the world’s leading network services company in the next two to three years. To achieve this target, it is acquiring companies in the Asia-Pacific region, the US and Europe which operate in network planning and design, infrastructure management and professional services. The company has earmarked Rs 10 billion for carrying out these acquisitions.
In October 2007, GTL acquired UKbased network management services provider Genesis Consultancy for about $9 million. The acquisition will strengthen GTL’s network operations and maintenance division as well as the professional services component of the value chain.GTL expects its network management and operations to grow substantially with revenue from this division contributing around 15 to 20 per cent to its topline over a period of three to five years.
The company made its second acquisition in November 2007. GTL International, a wholly owned subsidiary of GTL, acquired ADA Cellworks, a network planning and optimisation player in the Asia-Pacific region, for $25 million.
The acquisition will provide GTL access to the fast growing markets of China, Indonesia and the Southeast Asian Corridor, and strengthen relationships with leading telecom technology providers such as Nokia Siemens Networks, AlcatelLucent, Motorola, Ericsson and Huawei.
GTL is now in the process of acquiring Strategic Communication Services (SCS), a US-based firm engaged in network deployment services. The company has signed an agreement to acquire SCS through GTL International and expects to conclude the deal, subject to regulatory approvals, by the end of this year.
Meanwhile, as far as contracts are concerned, in the July to September 2007 quarter, GTL won two Wi-Max contracts worth Rs 2.3 billion from VSNL and Reliance Communications. The company is also providing operations and maintenance services for rolled out sites. It has won contracts worth Rs 400 million and Rs 700 million from original equipment manufacturers in Saudi Arabia and Nigeria respectively. Adding to its geographical presence in over 25 countries, GTL established operations in GuineaConakry this year.
The company is also focusing on new and emerging technologies. In August 2007, it signed a business cooperation agreement with Wi-Max solution provider Navini, which will enable it to offer WiMax services in the APAC, Indian and Middle Eastern markets. It has also entered into a business cooperation agreement with a telecom applications solution provider to offer services in the Indian and overseas markets.
With India ranked as one of the largest telecom markets in the world with a subscriber base of over 200 million, GTL’s revenues are skewed towards India. Approximately 80 per cent of its revenues come from domestic operations.However, the company expects that contribution from international operations will increase from 20 per cent to 50 per cent in the future.
Tower business
GIL played a key role in catalysing the industry-wide initiative to promote infrastructure sharing and established a viable business model.
Today, GIL is India’s largest standalone tower and telecom infrastructure company and has operations in 12 telecom circles in the country. The company is servicing five national-level and one regionallevel telecom operator, and has entered into long-term contracts of 10 to 15 years with these operators.
The company provides complete infrastructure services to telecom operators including building towers, and taking care of the entire spectrum of activities such as design, construction and maintenance of the infrastructure.
Unlike GTL, which has a presence in over 26 countries, GIL is completely focused on the Indian market, facing intense competition with the coming up of several independent tower companies. But as Prakash Ranjalkar, chief operating officer, GIL, puts it, “While there is plenty of opportunity for all players, our business focus, economies of scale and service delivery will differentiate us from our competitors.” The company is evidently confident about its strategies.
It has certainly set a trend. Realising that demerging their infrastructure operations and divesting stake will cut down costs and also earn returns on investments within a reasonable time-frame, most telecom players including Bharti Airtel, Tata Teleservices, Spice Communications and Aircel have also begun hiving off their infrastructure businesses.
Capitalising on this opportunity, GIL is now planning to pick up stakes in the telecom tower firms that are being hived off by service providers and independent tower companies. To put the plan into action, GIL, together with IDFC Project Equity (a wholly owned subsidiary of IDFC), has recently floated a special purpose vehicle (SPV). According to Manoj Tirodkar, chairman and managing director, GIL, “The SPV will enable GIL to pursue inorganic growth plans and hence maintain its leadership position as the largest third-party independent telecom tower infrastructure company in India.”
Given the massive demand from telecom operators, the company has decided to go for an aggressive rollout. It intends to set up 25,000 shared telecom towers in the next three years, at an investment of about $1.8 billion. By the end of November 2007, the company had about 4,000 towers in the country. As part of Phase I of the mega rollout plan, the company plans to have 6,700 towers in place by March 2008.
To pursue these plans, the company raised $300 million through a foreign currency convertible bond (FCCB) issue, which was oversubscribed more than 4.41 times. Meanwhile, GIL has also been sanctioned a $700 million loan by domestic and international banks.
Earlier, it raised $85 million through a rights issue that opened on August 16, 2007 and closed on September 14, 2007.In addition, the company’s board has approved the issuance of 263.7 million warrants on a preferential basis to its promoter group, IDFC and Technology Infrastructure. This will bring in additional funds of $250 million.
GIL is also a part of the Universal Service Obligation (USO) Fund’s Rural Mobile Telephony Project. In March 2007, the company secured a contract from the Department of Telecommunications (DoT) to set up 421 sites. DoT has guaranteed three tenants on each cell site rolled out under this project.
Outlook
GIL is still in the growth stage and has charted ambitious expansion plans.According to Ranjalkar, “The challenges typically lie in executing the plans, meeting the expectations of our customers and managing the financial resources well.”
Although it has not provided any timeframe, the company is planning to expand operations in 10 more telecom circles.Backed by strong expertise, experience, a good capital base and an intimate understanding of the Indian marketplace, GIL is well placed to play a crucial role in implementing the concept of shared infrastructure in the Indian marketplace.
In line with its focus on network services, GTL is planning to sell off its KPO unit as well. Its future gameplan primarily includes a stronger focus on Indian clients and simultaneously extending its presence in global markets. The company has clearly cashed in on its restructured model and intends to maintain the growth momentum.
