Satyam plans 500 Internet cafés by March

By : |November 30, 2000 0

Suresh Seshadri

CHENNAI: India’s Satyam Infoway Ltd. is busy rolling out a chain of cyber
cafés to popularize the Internet in a nation where the Web craze is running
high but personal computer penetration is low.

Satyam, the first private firm to launch Internet services in 1998 after
India ended a state monopoly, plans to have a network of 500 to 600 cyber cafés
by next March, up from the 120 now spread over Delhi, Mumbai, Bangalore and
Chennai.

                                 

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"With PC penetration levels, especially in homes unlikely to go up to
critical mass levels for another 10 years, we see cyber cafés as the vital and
affordable link for public Internet access," Satyam’s vice-president, cyber
cafés, VV Kannan told Reuters.

Personal computer penetration among India’s one billion strong population is
more than five million but most of them are still owned by companies and located
in offices, according to the figures from industry body, the National
Association of Software and Service Companies (Nasscom).

Telephone density too is low, at three per 100 people.

Kannan said studies also revealed demand for cyber cafés among young people
and students seeking privacy, and business travellers wanting to check their
e-mail.

"Interestingly, we also found that many PC owners also prefer to come in
and surf at a cyber café as they have just a single phone line at home, which
they do not want to block, or because they find it more cost-effective than
paying big phone bills," he said. Dial-up Internet users must pay telephone
charges in India.

Satyam now charges subscribers between Rs 25 and Rs 35 (53 to 75 US cents) an
hour to access the Net at its cyber cafés, which operate under the i-way brand.

Long-term revenue bet
India now has around 1.8 million Internet subscribers, their number having
doubled during the period from March to October, Nasscom says.

Satyam’s subscriber base for its dial-up Internet access service, now at
about 400,000 and growing by about 40,000 new subscribers each month, is still
seen as being too small for the firm to leverage significant revenue streams.

Kannan said the firm, which had invested about Rs 60 million so far in the
cyber café business, expected the café network to eventually help draw in more
than 500,000 Internet users by end-2001, when it hopes to have 1,000 cafés in
place.

"Our cyber café business model is one of being a branded chain….and
using a subscription model to build brand loyalty," Kannan said.

The firm has also adopted the franchise route to minimize its direct
investments into the cyber café network.

"Only about a third of the centers will be owned by us but the design
and hardware for all other centers too is standardized," Kannan said.

Satyam expects to eventually spend about Rs 200 million on the cyber cafés
and sees revenue from them growing from 2002.

"We are looking at about Rs 1 billion from the cyber cafés once the
network stabilizes and starts drawing in the large volumes of Internet users we
expect…," Kannan said.

(C) Reuters Limited 2000.

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