In conversation: HS Bedi of Tulip Telecom
Pratap Vikram Singh | February 23, 2012
Lt Col (retd) HS Bedi is the founder and chairman and managing director of Tulip Telecom Ltd, which was started in 1992 as software reseller. Today it is a leading player in providing enterprise data connectivity to corporates and has hands-on experience working on e-governance projects across the country. In an exclusive interaction with Pratap Vikram Singh, Bedi talks about the journey of Tulip Telecom since its inception and shares his experience of working on public sector projects, especially statewide area network (SWAN) and common services centre (CSC) projects. Edited excerpts:
How has been Tulip’s journey since 1992, when it started with just four employees?
We started reselling software products. Having started from a scratch, we could very quickly become the top most software reseller in the country. But we faced a lot of challenges. While you are selling products of other companies, they may change their business model and start appointing multiple distributors. As a result, the reseller’s margins started going down. So we decided to move away from that business and rather add hardware to our portfolio. We became reseller for companies like Compaq and IBM. When Dell came in, it is all history. Compaq and IBM took a big hit. So did the channel partners.
By then we had moved into wireless. We started our business of wireless in 2000. It was 2004 when we became a leader in wireless space. It was this project in Kerala to provide bandwidth to all the Akshaya kiosks. It was the first wireless district of the country. That was the starting point of what we are today. Thereafter, we did a project to provide connectivity to the kiosks of lottery operators in Maharashtra. That was the starting point of this business where we started connecting their kiosks in Mumbai. We were then asked to provide connectivity to Nagpur.
We leased the line from BSNL and provided connectivity. This was the first time when somebody had provided core connectivity through wireless transmission. Thereafter, we talked to HDFC and other banks and they allowed us to connect their banks. There on we started adding more and more customers. So the real turning point came in 2004.
We started [providing connectivity] in wireless. This was the first time it was done in wireless. Thereafter, we started growing this business and now we have reached a stage where we are the largest player in this business. We hold a 30 percent market share of the MPLS VPN market which is the core data connectivity for the corporates, as per Frost and Sullivan. This is more than Tata, Bharti and Reliance put together.
What are your core areas of business?
We were primarily in multiprotocol label switching (MPLS) virtual private networks (VPN) wireless connectivity. Now the problems and challenges of wireless are that it only allows you to determine low bandwidth. Subsequently, we could deliver low bandwidth to corporate and we started doing this by providing connectivity to all branches of organisations like banks and corporates in the smaller towns, where they had low bandwidth requirements. Later on we captured the whole business to the extent that 75 to 80 percent of the corporates are our customers.
Further we realised that we needed to grow because wireless is basically a low bandwidth, therefore low revenues. So if you want to really grow that business, you need to look at a bigger market, which is the fibre-based market. So you need to get into national distance, international distance, and corporate internet and so on. We kick-started laying down fibre cables in 10 cities, initially, and covered 300 cities over these years.
Having reached that stage, we decided to get into the space of network attached services like managed services, supplying equipment, managing networks, and data centres, cloud services and so on. As per TRAI, data forms 0.5 to 2 percent of the business of the large telecos. They all are primarily voice companies, while we operate only in data space. Globally, if you look at large telecos, 60 to 70 percent of the revenue comes from data. It is only in India which is an emerging market, where revenues are coming from voice. We believe that as market matures, data will be a key. And we are primarily into data.
How do you see the business proposition in e-governance projects?
E-governance accounts for just five percent of our revenue. We made a start in e-governance in a big manner. Primarily we did statewide area network (SWAN) in Haryana, West Bengal, Madhya Pradesh and Assam. But then we did not grow that business too much. After taking up work for the four SWANs, we haven’t taken another, beyond. There is a demand for SWANs. But there are lots of challenges involved. No one has made money in SWAN. We picked up four SWANs, but till now we have been able to get the payments for just one, which is Haryana SWAN, while in West Bengal, Madhya Pradesh and Assam the situation is not so good. As a result, we have decided to not take up any SWAN projects further. We have fair amount of coverage with respect to accelerated power development and reforms programme (APDRP) project. We won this project in states of Gujarat, Uttar Pradesh, Uttarakhand, Punjab and Andhra Pradesh. Going forward, we will be looking at growing the bandwidth and managed services business.
We are looking forward to growing our bandwidth business. So we are providing bandwidth to SWAN in Maharashtra. And we are now looking forward to providing connectivity to few other states.
How do you see the whole e-governance drive in the country?
While I am not competent enough to comment on the quality of work being done by the government under national e-governance plan (NeGP), I feel the CSC project, under the plan, was expected to become the main centre for delivery of services in rural areas. But again there not many people have made money. In fact, lots of people have lost money. I am not too sure about going ahead with CSCs as the delivery points of services.
The way technology is changing today, it could have made sense to have CSCs earlier, but as the broadband grows further, services could be delivered anytime, anywhere and everywhere. So you may not need those centres anymore. As the new applications will come up, they all will be cloud-based and internet-based. When it is net-based, you don’t need to go to a CSC; you can do it from home or go to anyone with a computer.
e-Panchayat can become an interesting project. If the project takes off well, it can be a game-changer. The moment the fibre is available right up to the village, I just need to put last-mile connectivity in place, and now I can actually start providing end-to-end connectivity to the rural households.
So that is what we will be looking at, provided the fibre actually takes off as expected to and costs are kept under control. Because the fibre is already paid for by the USO (universal service obligation) fund, I believe it should be made available at fairly reasonable rates. Then it will be very much possible internet connectivity across the country at very reasonable rates.
What are the challenges of working on public sector projects?
While there is a lot of investment that has been made in place, there are not many applications in place. And when applications are not in place, you have nothing to deliver. You created your infrastructure, by the time you place your application, the hardware would be obsolete.
It may make sense for the organisations to ramp up the applications as part of it. Secondly, it is important to have a clear business model in place. If it is a true public-private partnership (PPP), you need to ensure that the private partner makes money. You cannot provide social service, being a private entity. For example, if a SWAN is to be rolled out, the (private) partner has to buy the complete equipment from the manufacturers, and then he has to go to the state to deploy that material. The sites may not be ready. These are things where the vendor doesn’t have control but the government has.
But if the site is not made available the network cannot be rolled out. And when the network cannot be rolled out, you can’t get your money. But you have made your investments. And because in a competitive environment, you are working on very thin margins, and this delay in payments or non-payment has adverse effects on business. As a result the project cost often overruns the project profitability.
What is the solution?
I think the government must be more partner-sensitive. The delays due to its own reasons need to be paid for. It has to be a true public-private partnership.
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