On a fast track to profits

Kaushal K Bajpeyee

RailTel's optic fibre network is much in demand. As a result, the Indian Railways company is raking in money.

Thirty-something Rahul Paliwal, who runs Moon Network Private Limited, a cable company in Agra, is getting ambitious. Having captured almost 90 per cent of Agra's cable TV homes, he now wants to be a multi-city operator and hopes to move into the neighbouring town of Ferozabad.

For that, he wants to lease capacity on the optic fibre cable (OFC) network that's been laid along the railways tracks between Agra and Ferozabad. The optic fibre belongs to RailTel Corporation of India Ltd, the Indian Railways' wholly-owned undertaking which was set up in 2000 to build a nationwide broadband multimedia network. RailTel is understood to be studying Moon Network's proposal.

Another proposal pending with RailTel is that of Zee Group's cable company, Siti Cable. Media industry sources say that Siti Cable wants to lease space on RailTel's network from Delhi to Jammu.

"We have put in a proposal but it's not for such an elaborate stretch," is all that Zee group vice chairman Jawahar Goel is willing to say.

Both instances illustrate one phenomenon "� RailTel's optic fibre network is much in demand. Cable companies as well as telecom service providers are making a beeline for space on the network. RailTel's managing director Kaushal Kumar Bajpeyee says that while the company is already in business with some telecom service providers, it is yet to fully tap cable TV companies.

"In the last couple of years, we've leased our bandwidth to telecom companies like Hutchison Essar, Bharti Televentures and Idea Cellular," he adds. Some time back, the company signed a major long term lease deal with Tata Teleservices which will use RailTel's bandwidth and fibre network all over the country for its cellular operations.

RailTel's director (network planning & marketing), Mahesh Mangal, however, adds that in West Bengal several cable companies are already utilising its capacity. He claims that RailTel has given 1,000 route km of fibre for cable TV in West Bengal and Bangalore.

In Kolkata, Cable Comm, Trinity and Manthan are using the RailTel network for delivering cable TV. "Basically most cable companies now want to expand their networks into nearby towns, say, from Kolkata to Midnapur," explains Mangal.

But what makes the RailTel network so attractive to telecom and cable operators? It's sheer size and spread, to begin with. Since its inception four years ago, the corporation has already put 25,500 km of optical fibre cable in place.

The core network connecting four metros (Delhi, Mumbai, Kolkata and Chennai) and four mini metros (Ahmedabad, Pune, Secunderabad and Bangalore) has been operational for the last six months. Its network plans are ambitious "� 40,000 km of optical fibre cable by 2005.

"There's no doubt that the reach of the network is phenomenal. Multi-system operators who want to cross over to newer cities may find it very useful as they need not lay their own fibre," says Hinduja TMT's executive director Ashok Mansukhani.

Even for a large single city operator that wants to grow, it makes business sense. "Moon Network cannot afford to connect Agra with Ferozabad with underground cable. Even leasing capacity from RailTel is not cheap but we should be able to recover our cost," says Paliwal.

He's keen to connect the two cities as he also runs four popular local cable channels, including one that covers local news. His plan, if the deal goes through, is to take his signals underground from Agra to Ferozabad on the RailTel network and then use overhead cables in the city.

There's a push factor for RailTel to hawk capacity too. For its own communications needs, the Indian Railways do not require more than five per cent of the total existing capacity.

Clearly, having sunk Rs 1,100 crore into creating the network, it has to make the most of it. "For us it makes perfect business sense to drive a hard bargain with potential users," says RailTel's Bajpeyee.

And that's what RailTel's clients, especially cable operators, are complaining about. The heads of at least two MSOs say that RailTel's network is too expensive.

Though Bajpeyee is not willing to divulge the rates, a top executive at an MSO says that the corporation is asking for at least Rs 20,000-Rs 22,000 per km a year. "If you want to go intra-city, it is a huge investment for a path that's been leased," he says.

Bajpeyee, who took over as managing director last month, does not agree. "We will use our opportunity cost. But there is no flat rate. I have told my people to negotiate for the best rate and the MSOs also haggle," he says.

RailTel is open to offering a revenue sharing scheme to cable operators as well, if the conditional access system comes into force. "Today it may not work as under-reporting of subscriber numbers is rampant in the cable business," he adds.

The hard bargains that RailTel has been striking seem to be paying off. In 2002-2003, it generated a revenue of Rs 26 crore. This year it expects revenue to be Rs 100 crore, with the Tata deal contributing a major chunk of this sum.

"We are a very young company and we're already in business. We are not cash surplus in paper terms but have been meeting our operational expenses since last year," he adds.

Encouraged by its financial performance, RailTel too is getting ambitious.

It now wants to get into the international long distance and national long distance business and create virtual private networks. The corporation has already got an internet protocol and internet service provider licences.

As a result, it can offer protected and unprotected bandwidth VPN network services, ISP services, corporate lease lines and voice over internet protocol services.

"We have 7,000 stations "� that's our backbone. We can give you cable up to there. We are open to joint ventures with medium sized companies for internet cafes at the railway stations," says Bajpeyee.

Mansukhani firmly believes that as the broadcasting and telecom industries grow and more bandwidth is needed for value-added services, RailTel will have its hands full. No wonder, then, that Rahul Paliwal is hurrying up and grabbing space before it is too late.