Satyam Infoway's Q4 net loss shrinks

Suresh Seshadri

CHENNAI: Satyam Infoway Ltd., one of India's largest Internet service

providers, on Wednesday said its net loss in the January-March quarter halved

from a year earlier but was little changed from the previous quarter.

It posted a fiscal fourth-quarter net loss of $8.4 million, compared with a

loss of $17.5 million in the year-ago quarter and a loss of $8.3 million in the

previous quarter. Revenues eased 4.7 per cent quarter-on-quarter to $8.2

million.

Nasdaq-listed Satyam Infoway has been increasing prices and expanding its

chain of Internet cafes at a time that smaller rivals have been going under.

"The company has done quite creditably in terms of operating margins given

that revenue has dropped quarter-on-quarter in the face of persisting slowness

in the retail access business," an Internet analyst with a Mumbai-based

foreign brokerage said.

The results, announced before Wednesday's Nasdaq market opening, pushed the

company's American Depository Receipts (ADRs) 3.6 per cent higher to $1.42 at

the start before easing to $1.40 in morning trading.

Satyam Infoway now expects to start generating cash by the end of this year

as it cuts costs and sees continued growth in revenues.

The company has $16 million cash in hand, which should be enough for the year

at its current burn rate of $3.4 million per quarter, Managing Director R

Ramaraj told a news conference.

"One of the biggest positives is that they have cut cash burn by 20 per

cent from the previous quarter," the analyst said.

Corporates, cybercafes as drivers

The Chennai-based company also provides e-commerce services and a Web portal,

and plans to offer Internet telephone services at drastically discounted rates.

Ramaraj said the company expected its key revenue earner, corporate services,

and a unique countrywide network of branded Internet cafes, which it doubled in

size during the year, to continue to be the biggest business drivers in coming

quarters.

"Going forward we expect...the rollout of broadband access at our

cyber-cafes to help drive our business," he said. The company expanded its

Internet cafes, called i-Ways, to 680 locations in the last quarter from 616 at

the end of the December quarter and 301 at the end of March 2001.

Ramaraj said the company's bandwidth costs, which currently account for 35

per cent of total costs, are also expected to drop by about 30 per cent in the

first quarter as the company ties up with new vendors.

"We expect this reduction in bandwidth cost to positively impact us in

the second quarter."

Satyam Computer Services Ltd., India's fourth-largest software exporter, owns

52.5 per cent of Satyam Infoway but plans to sell this stake to a strategic

partner. Its subsidiary's results came in after the Indian market closed.

The ISP's loss before interest, tax, depreciation and amortisation narrowed

to $5.3 million from $9.0 million a year earlier, but widened from $3.8 million

the previous quarter. Ramaraj said this was due to a one-time expense of $1.5

million on new software for its Internet telephony service.

Its full-year net loss was $147.5 million, or $1.59 per ADR, compared with a

loss of $51.4 million, or $0.56 per ADR, the previous year.

Full-year revenue breakdown

Annual revenue rose 28.7 per cent to $32.3 million. Satyam Infoway said

revenue from services to companies rose 38 per cent from a year earlier and

accounted for 52 per cent of the total in the year to March. Revenue from the

retail ISP business rose 4.2 per cent and made up 22 per cent of the total.

But its retail subscriber base, which grew in double-digits for the year,

remained stagnant at 600,000 connections for the quarter, dampened by slowing

personal computer sales and saturation of Internet penetration among existing PC

owners.

Its main competitor in the ISP business is the recently privatised Videsh

Sanchar Nigam Ltd., the country's ISP pioneer and overseas telecoms giant. The

two firms, which run neck-and-neck in terms of number of retail Internet

accounts, together command about 80 per cent of India's nearly 1.5 million

active Internet subscribers.