RailWire, the consumer broadband arm of connectivity provider RailTel, said it plans to invest Rs 125 cr in coming months to increase its subscriber numbers by 20 times in the next two years.
The company has already seen an increase of around 2.5 to 3 times in its customers over the last two years, almost purely on the back of its preexisting capacity.
Over the last two years, total subscribers have gone from around 1.5 lakh to 4.22 lakhs, with the company setting its sights on taking it to 8 million over the next 24 months.
RailWire got a big boost from COVID-19 because it was the only non-BSNL provider of wired internet services in many rural and remote areas, thanks to a network that goes wherever the country’s railway network does.
In the last 12 months alone, RailWire’s subscriber numbers have increased by 75% and revenue has increased by 57%. Due to the exploding revenues, profit margins in the ISP business has doubled in a year.
According to numbers for the latest quarter — July to September 2021 — RailTel’s revenue from internet services grew by over 15% in three months, which works out to an annual growth rate of over 61%.
The biggest advantage of RailTel has been its low-cost expansion model.
Unlike traditional telecom companies like Reliance Jio and Bharti Airtel, RailTel does not take its network to the customer premises, and relies on agents — mostly local cable operators — to construct and maintain the last mile and sign-up customers.
This has proven to be an excellent business model during the pandemic-driven spurt in demand for high-speed connectivity for two reasons.
First, it helped the company expand much faster than traditional, full-service players like Jio. Unlike traditional telecom players, in case of RailWire, the expansion takes place on a decentralized model: Cable operators in each area are in charge of expanding the network in that region without any funding or supervision from RailWire.
Secondly, given the inherent excess capacity in the underutilized core network, RailTel was able to cater to this spurt in demand without investing majorly in its core network.
Both these factors enabled RailWire to go from around 1 lakh customers three years ago to over 4 lakh customers in a relatively smooth fashion.
The company is gearing up for even faster growth.
“The emphasis on digitalization has gone up like it has never before,” said Chairman and Managing Director Puneet Chawla, referring to the COVID-19 era.
“Work from home has taken demand for telecom services to the next level…This is due to people, and students, working from home. Once this phenomena has started, it will continue.
“Similarly, health projects – people are increasingly using tele-consultation. So, education and health will continue to grow.”
However, with the pandemic driving demand and consumption of data, RailTel has been feeling the burden of increasing traffic and congestion, and requires to expand its core network in the coming month to maintain the momentum.
Moreover, to stay competitive against a player like Jio Fiber — which adds 2 lakh customers every month — RailTel has to start thinking in terms of millions of customers rather than lakhs.
Finally, even private players like Bharti Airtel have started adopting its strategy of decentralized expansion and services using LCOs, nullifying a key execution advantage for the company.
Chawla said the company’s existing core network still has some more capacity that can be used to support more subscribers, but it needs to start investing now to really take full advantage of the new market opportunity.
“We want to grow [ISP services] by 20 times in the next two years,” Chawla said. “We are increasing our capacity multifold, for which we are in the advanced stage of finalizing our tenders.”
The company has also tied up with central-government agency C-DoT, which focuses on developing novel technologies and solutions for driving connectivity. This agreement, said Chawla, will help it reduce network costs by procuring and deploying Make-in-India equipment as part of the expansion.