Satyam plans 500 Internet cafés by March

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.

"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.