The transformation of Sify into an enterprise-only business doesn’t appear to be too far away. The numbers dont lie: Sify reported revenues of $3.09 million for Q1-11, less than 1/10th of its enterprise revenues of $32.52 million for the quarter, and 7.9% of total revenues of $38.63 million. Consumer business revenues business declined 44% in the first quarter of the 2010-11 fiscal, in comparison with the same quarter last fiscal year, when it reported revenues of $5.54 million. At the same time, the growth in the companys enterprise business has been significant at 19.5%. Overall revenues have grown 9.5%. Nevertheless, the company has given itself 12 months for the consumer business to become profitable.
The traditional franchisee cyber cafe model is ramping down according to the company, which has resulted in an investment in a services based model, and look beyond its own franchisees (and reduce CAPEX). Company executives said on the conference call that with the growth of home and office broadband connectivity, the need for cybercafes has come down. Added to that, the pressure of an increase in real estate costs, wages and electricity. In what appears to be a veiled hint that it is rolling back its e-ports strategy (single computer kiosts), execs said that “the way Sify would have overcome this, is by expanding cafes to more locations by expanding the network, but that is not our model.” I suppose they meant that this is not their model anymore.
What About Sify’s Own Home Broadband Business?
It isn’t lost on us that Sify also has a home broadband service, which has been on the decline: they obviously haven’t benefited from the growth (however limited) in home broadband usage, and consumers have preferred other service providers. In fact, this quarter, Sify has chosen not to publish detailed figures for their eports and broadband business. Data from last quarter:
Plans: Sify mylife
The company has launched Sify mylife, a consumer, cloud services model targeting cybercafes, offering them Sify Talk ISD Calling, Online Test Centres, an Online Advertising and Brand engagement platform, and allowing consumers access to services like ticket bookings, mobile recharge, online tests, bill payments, gaming etc.
The company says that this allows them to target more cybercafes and larger number of users. The cloud service makes it independent of Sify connectivity, and can be accessed by cybercafe that has connectivity, with their back end solution and security features. Sify is targeting 100,000 cafes for mylife, and plans to beef up its VAS portfolio.
Just One Last Thing
Answering a question about at what point does the company plan to re-evaluate and sell some of the unprofitable business and focus on the unprofitable ones, Sify said they’re re-evaluating their businesses. They claim their business has been EBITDA positive for a while, but because of significant infrastructure investment and accelerated depreciation, they have a loss at a net level. Once the businesses scale up, they will be profitable. The biggest challenge, though, is the consumer business.
During the quarter, Sify implemented their first state data center in Tripura. They’ve also inked a deal with Aadhaar, India’s Unique Identity Project, for Testing and certification, for 3 years.