IT
Scan
October
5 , 2002
India’s Internet service providers find the going
hard
Rajendra
Prabhu
NEW DELHI -- India’s number four IT company Satyam
Computers is bringing down its holding in its Internet
service provider company Satyam Infoway, the largest
among the country’s ISPs with a subscriber base
of 650,000. Japan’s Softbank and UK’s VentureTech
are buying stakes into it investing $20 million. Their
33.4 percent stake will reduce Satyam’s holding
in this loss-making unit to 35 percent.
Ramalinga
Raju, chairman of both Sify and Satyam Computers said
he would be stepping down from Sify chair as soon
as the strategic investors are brought in. Sify managing
director Ram Raj said in Hyderabad, "The distancing
of Ramalinga Raju and Satyam Computers is disappointing."
Satyam
Computers has been asking for buyers for stake in
Sify since the last six months. The fact that the
largest among the ISPs is being sold clearly shows
a fall in this once premium market. Several other
leading players in Internet service have already got
out like BPL and Bharti. Data Access, once an aggressive
ISP, has now moved into international long distance
area, though, according to its CEO Sidhdharth Ray,
it will continue to service existing customers. Caltiger
had surged forward with its free Internet service,
but later beat a hasty retreat after heavy losses
and is concentrating more on special services. Rediff,
yet another aggressive player, has also failed to
show profits despite providing a range of new services
online for its subscribers.
None
of the major players has seen money in the job. Total
subscriptions remain at a low of less than two million.
Competitive price cuts have not generated subscribers
that were expected to, mainly due to the high price
of a PC. When ISP licences were announced in 1997,
some 506 firms were actually licenced. Only a handful
really got going even though 150 started service.
The actual subscribers at the end of last March was
1.7 million and will be 2.2 million by end of this
year. The NASSCOM forecast for March 2005 is 7.7 million,
provided PC prices decline by 40 percent.
The
reason why ISPs are not celebrating even after the
government allowed them to run Internet telephony
services and set up international Internet gateways,
is because the business plans of most of them depended
on an advertisement stream making up for low revenues
from dial-up subscriptions. This remained a dream.
Some operators like Caltiger -- who claimed that it
has targeted advertisement space for specified customer
groups, failed to attract buyers for the ad space.
Advertisers remained skeptical because the space available
for them was too little to attract attention.
A
major constraint is the high cost of a PC. There is
only a base of 6.4 million PCs by March last against
25 million in China, as per NASSCOM figures. However,
in terms of Internet users, NASSCOM figures are 10
million now and 50 million by 2005.
