The early years of Tulip IT Services as a software products trading company were rather nondescript and quiet. That was 15 years ago. Then the company opted for a transformation, diversifying its product line to offer network integration, corporate data connectivity via multiprotocol label switching-based virtual private networks, rural connectivity and infrastructure management services.
Today the company has carved a name for itself, particularly in the broadband and enterprise space, competing with no less than Bharti Airtel, Videsh Sanchar Nigam Limited, Reliance Communications and Bharat Sanchar Nigam Limited.
Pitted against such strong competition, the company’s advantage lies in its much smaller size and relatively lower overhead costs which allow it to be more nimble and cost-effective.
Recently, Tulip was in the news when it joined the stampede to acquire a unified access service licence (UASL). It submitted its application for licences for six circles. Says Colonel H.S. Bedi, chairman and managing director, Tulip IT services: “We plan to enhance our reach and service offerings based on emerging requirements, and the application for these licences is a step in this direction.”
With vast expertise in providing connectivity to enterprise customers, analysts believe that this Delhi-based telecom services and IT solutions provider deserves a shot at providing telecom services.
The downside is that it has no network infrastructure of its own. If granted the licence, this could become a disadvantage, largely because the substantial capital expenditure required would eat into the company’s profitability. (However, the company has commenced deployment of fibre in 10 major cities in India.)
Moreover, the Department of Telecommunications (DoT) may not end up granting more than 90 licences (three or four per circle), from the heaps of applications it has recently received. In that case, the company’s chances of becoming a UASL holder diminish.
At the moment, it has no real need to worry because it has won an international long distance licence which will allow it to provide international voice, video and data connectivity. According to industry estimates, the international connectivity market value is expected to double from Rs 18 billion in 2006 to Rs 36 billion in 2012.
Background
Tulip IT Services provides point-to-point as well as point-to-multi-point connectivity based on radio frequency technology.
In May 2007, the company added a new set of offerings to its existing portfolio.These include managed data centre services, managed customer premise equipment services, and managed video services.
These services are slated to generate substantial revenue for the company. While the Indian internet data centre market is set to grow to $200 million by 2009, the video conferencing market size is presently around $25 million. According to Frost & Sullivan, it is expected to expand at a compounded annual growth rate of 21 per cent.
Financial status
The company’s investments are paying off.Its revenue has increased by 43.02 per cent from Rs 1.85 billion in the quarter ended September 2006 to Rs 2.65 billion in the quarter ended September 2007. Net profits have similarly improved, rising from Rs 202.5 million to Rs 370.9 million.
Concerns
In a word, the main concern is competition. While Sify, Avaya and Hughes are its main competitors in the VPN business, it is struggling to hold its own against larger integrated telecom players for meeting enterprise networking and connectivity needs.
A relatively late entrant with less capacious pockets than its rivals, analysts say that Tulip must be careful not to lose the niche it has made for itself.
According to Nareshchandra Singh, principal analyst, Gartner, Enterprise Network Infrastructure and Services, Tulip’s biggest weakness is that it does not own its own core infrastructure. It leases optic fibre cables from other players such as Power Grid. “Hence, the availability of its services to some extent depends on cable leased from other players,” observes Singh.
Furthermore, Tulip uses wireless technology ?? not the best medium for enterprise data connectivity needs ?? to provide last mile connectivity. Wireless technologies are prone to latency and errors in data communication.
Future plans
Tulip plans to expand its international business by exploring overseas opportunities. According to Bedi, “A number of leading Indian enterprises are looking to go global as part of their business operations and becoming technology intensive.At our data centres, we can provide such companies with world-class data-hosting facilities for both their domestic and international requirements.” Tulip has decided to raise $125 million through bonds with an option to increase the issue by another $25 million. The proceeds will go towards funding its capital expenditure requirements both for overseas acquisitions and infrastructure expansion.
With rural connectivity on the rise, Tulip will also focus on promoting e-governance. Recently, it won a five-year, Rs 530 million contract to develop a statewide area network in West Bengal.
Part of the National e-Governance Plan of the union government, this project envisions connecting all subdivisions, block headquarters and gram panchayats.Tulip will manage the operations of the entire network.
The company has also won a similar contract in Haryana and is building data centres in Goa and Uttarakhand.
