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Q1 Results: Sify Consumer Services Biz Continues Decline – Revenues 18% Down; Sify.com Relaunch In Q2

With revenues 18 percent down year-on-year, Sify’s consumer business segment continues to decline. At the same time, revenues from the enterprise business have grown by 17 percent, and Sify appears to be transforming well and truly into an enterprise solutions company. On the whole, the company ended Q1 08-09 with revenues of $35 million, and a net loss of $2.39 million

Some notes from the earnings release on the consumer business:
Sify Broadband: expanding services in North East India – into Shillong, Aizawl, Silchar, Tezpur, Nagaon and Agartala.
e-Ports (cybercafes, formerly iWay): Expanded to 28 new cities, with over 2000 e-ports across 180 cities and a claimed subscriber base of over 200,000. They’ve added a net 30 cybercafes in the quarter, and some orders have been received for kiosks (eport Xpress).
Sify.com (horizontal portal): tied up with SET for reality shows Champion Chaalbaaz and Dus ka Dum. The site and some channels (Sports, News) were revamped.
WiZone (WiFi service): Wireless broadband has been launched in 9 cities in June and will be expanded to 30 cities. Note: the website mentions only Bangalore and Chennai

Sify’s consumer businesses also include Way2Talk (Internet Telephony service), imeet (Video conferencing) and Gamedrome (gaming cafes), but there are no updates on these in the earnings report.

Perhaps it’s premature to be announcing the death of Sify’s consumer business – Raju Vegesna, Chairman, CEO & MD of Sify Technologies says that the impact of the restructuring of the consumer business will be felt after the second quarter of this financial year, which is when Sify’s portal will be relaunched.

Our take: Consumer Business Too Dependent On Access; Slow Growth, Long Struggle

Sify’s dependancy on the access business has been a cause for concern – the Broadband and cybercafe business delivered significant traffic to the portals. With the growth of other broadband access service providers like MTNL, BSNL, Airtel and Reliance Communications, as well as the decline in cybercafe business (compounded by the increase real estate rates), the access side of the business could be a concern.

While investing in Wireless Broadband and kiosks is a solution, WiFi will require significant distribution for uptake, and is dependent on laptop sales; Not until there are thousands of access points will consumers choose WiFi zone, and even then, there’s competition from the likes of Tata Communications (Indicom) which also has its own WiFi Zones. The kiosk model is yet to work for anyone in India, and the distribution will be costly, and we really can’t comment on the success of such a model. The access business is an expensive proposition for Sify, and it is competing against telecom operators in this segment.

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