The district of Malappuram, a hilly 3,500-square km area with roughly 3.5 million inhabitants, wanted to become the first district in the country to become “100 percent computer-literate”. They intended to do so through “Project Akshaya”, a government-led initiative to put up hundreds of Internet-connected village centres, where people could email, surf, or learn basic computer skills.
But most of the villages didn’t have a wired telephone connection at the centres; and the vast and hilly terrain made it expensive to lay additional cable. The solution — going wireless — became Tulip’s market opportunity. In 2003 it won the contract to put up a wireless radio network linking the various village centres. It was a challenging project for a company unused to such scale. At times it faced severe cash flow issues, but got support from understanding government representatives who loaned it Rs. 2.5 crore in advances.
By the time Tulip was done with the Malappuram wireless project, it had gained crucial first-hand knowledge of two things: The vast market opportunity in wirelessly connecting smaller towns and cities, and the technical ability to design and build cost-effective networks.
Alok Shende of Ascentius, a telecom consulting firm, calls the people at Tulip a bunch of “very savvy opportunists”. He says, “Tulip has capitalised on certain white spaces in the market. For instance the enterprise data market was traditionally a top-down one, with the early movers targeting large companies. Mid-market customers were not being addressed, which Tulip did a phenomenal job of. There was a clear opportunity, and they rode the wave.”
Tulip’s decision to target enterprise customers from the bottom-up (technically more like the middle-up) had another advantage: It faced very little competition. So, it signed up customers at a fast rate, didn’t face as much competitive pressure on pricing and most importantly, it remained off the radar of bigger players.
It achieved scale in a relatively short time — over 1,300 customers across 1,500 cities, nearly Rs. 500 crore in sales every quarter and a number five position in the Indian enterprise data segment with an overall market share of 11.3 percent (just 3-4% less than the next three players Bharti-Airtel, Reliance and BSNL. Tata Comm with a 23% marketshare is the clear leader).
“We took the game from 10 cities to 1,500 cities, changing the rules of the game,” says Bedi. He is right, because in many ways Tulip’s wireless last mile network, which he claims is the largest in India, is like the mass-market distribution reach of a consumer goods company like Unilever. While his larger competitors were investing in expensive submarine cables and national fibre networks to carry huge amounts of data within and outside India, Bedi was putting in place the last mile infrastructure to sell it to customers.
And yet his business almost came to a standstill in 2005, when the Indian government imposed a license fee of Rs 10 crore on telecom companies that wanted to offer virtual private network (VPN) services to customers. VPNs are secure computer networks created atop public communication infrastructure. For many businesses it is a cost-effective way to create a private communication line between its offices. According to research firm Frost & Sullivan, the VPN market at 36% forms one of the biggest chunks of the Indian enterprise data services market. And wireless VPN customers are the mainstay of Tulip’s revenue.
“I didn’t have the fee money, and even after pitching to many investors, no one was willing to [invest],” says Bedi.
Fortunately things changed. Intel’s venture capital arm along with a few other funds offered Rs. 40 crore in return for a 40% stake in the business. Then Yes Bank offered an alternative — Rs. 30 crore in debt. But ultimately Bedi decided to try his luck with the stock market. He filed for an IPO and in December 2005 managed to sell 30% of his company to investors for Rs 105 crore. The general public had valued Tulip 3.5 times more dearly than veteran technology investors.
Now that he has proved that wireless connectivity was an immensely profitable opportunity, Bedi wants to move on. “A year back we decided that wireless, with its limited capability, could only take us so far.” His new big bet is fibre.
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