Sify Technologies Ltd (SIFY) 2005 Q2 法說會逐字稿

Greetings, ladies and gentlemen, and welcome to the Sify Limited Second Quarter 2005 Earnings Conference Call. (Operator Instructions). It is now my pleasure to introduce Truc Nguyen, Investor Relations for Sify. Ms. Nguyen, you may begin.

Thank you very much. On behalf of Sify, I would like to extend a warm welcome to all our participants today. I'm joined on the call this morning by R. Ramaraj, Chief Executive Officer; George Zacharias, Chief Operating Officer; and Anil Ahuja, Chief Financial Officer.

Following our comments on these results, there will be an opportunity for questions. If you do not have a copy of our press release, please call the Global Consulting Group at 646-284-9418, and I will have one sent to you. Alternatively, you may obtain the copy of the release at the investor information section on the Company's corporate Web site at www.sifycorp.com. A replay of today's call may be accessed by dialing in on the numbers provided in the press release or by accessing the Web cast in the investor information section of the Sify Web site.

Some of the financial measures referred to during this call and in the earnings release may include non-GAAP measures. A presentation of the most directly comparable financial measures calculated and presented in accordance with GAAP and a reconciliation of such non-GAAP measures of the differences between such non-GAAP measures and the most comparable financial measures calculated and presented in accordance with GAAP are also available on Sify's Web site.

Before we continue, I would like to point out that certain statements contained in the earnings release and on this conference call are forward-looking statements rather than historical facts that are subject to risks and uncertainties that could cause actual results to differ materially from those described. With respect to such forward-looking statements, the Company seeks protections afforded by the Private Securities Litigation Reform Act of 1995.

These risks include a variety of factors including competitive developments and risk factors listed from time to time in the Company's SEC reports and public releases. Those lists are intended to identify certain principal factors that could cause actual results to differ materially from those described in the forward-looking statements but are not intended to represent a complete list of all risks and uncertainties inherent to the Company's business. I would now like to introduce Mr. R. Ramaraj, CEO of Sify. Mr. Ramaraj?

Thank you, Truc. I would like to welcome everyone on the call once again ,and thank you for joining us this morning. I'd like to start by giving you the highlights for the quarter ended 30th September. George will then provide more details about the quarter. We will respond to the questions you may have at the end.

We are pleased to report revenues for the quarter of $26.7 million, 36% higher than the same quarter last year and 15% higher than the immediately preceding quarter. Our cash profit in adjusted EBITDA terms for the quarter was 1.23 million compared to $0.34 million in the preceding quarter. The second quarter has seen significant improvement in EBITDA as we continue to focus on realizing net profitability. Net loss was at $1.4 million, 37% lower than the net loss for the previous quarter of $2.23 million.

We ended the quarter with a cash balance of $26 million after incurring CapEx of about $4 million during the quarter. We have made significant investments for growth over the past three quarters in CapEx, marketing and power and bandwidth. We've been able to build the growth momentum during the quarter across our businesses, including portals, broadband, Internet telephony, and our corporate business.

And now I'd like to share with you some of the milestones achieved in consumer services this quarter. SifyMax.com, India's first complete broadband portal, grew strongly during the quarter both in terms of users, content and revenues. The site now has about 50,000 hours of audiovisual content across genres like news, cinema, sports, humor, Internet radio, et cetera. We also saw strong growth in our high-speed subscriber base, growing to 125,000 during the quarter with services now available across 73 cities.

Internet telephony usage grew by about 28% over the previous quarter with strong growth in revenues from our Internet Telephony Booths. Our online games initiative also showed strong growth with an average of about 100,000 hours played every month during the quarter. In Corporate Services, we continue to lead the market for IP VPN services with Frost and Sullivan awarding us the IP VPN Market Leadership Award once again. These awards have validated Sify's leadership in the network services market in India over the last three years. Our revenues grew strongly on the back of new orders as well as repeat orders from existing customers. I'll now hand over the call to George who will take you through our operations during the quarter in some detail. George?

Thank you, Ram. This quarter saw accelerating growth, increasing our adjusted EBITDA by about $890,000, reducing net loss by about $830,000, and setting us up for further progress during this fiscal year. I shall now cover briefly the highlights of the operations, first for our consumer services, and then the corporate.

Consumer services accounted for 42.4% of revenues during the quarter. Portal revenues grew by more than 22% on a sequential basis and by over 66% over the same quarter last year, driven largely by broadband content revenues, advertising and mobile content. Sifymax acquired exclusive broadband rights during the quarter for two new TV reality shows, Zee TV's "Sa Re Ga Ma Pa Challenge 2005," a music-based reality show, and the third edition of MTV's "Roadies," an adventure reality show. This should add a further impetus to the site's growing popularity among youth with about 2 million video clips viewed last month.

Sify.com's educational channel launched online courses for the Central Board of Secondary Examination syllabus, in partnership with e-gurucool, a division of NIIT, a leading learning solutions company. The lessons are available for Mathematics & Science for standard IX through XII, and also course content with interactive exercises, simulated tests and expert help. We added mobile games during the quarter for users along with the already popular ring tones, astrology, news, cricket scores, sports news and wallpapers. New advertisers in our forces included ABN Amro, Bajaj Avenger, Mahindra Scorpio, Tata Indigo, Dell Computers, Cornell University and the India launch of Makemytrip.com.

In consumer access, as Ram highlighted earlier, our high-speed Internet access to homes grew to about 125,000 subscribers, with the service expanded to 73 cities. Our iWay cyber cafes increased in number 2,900 with the service being extended to 132 cities and towns. Internet telephony usage grew by about 28% over the previous quarter with strong revenue growth from our Internet Telephony Booths. We now have more than 1,000 ITBs signed up. The service is also being extended to corporates in the ITES segment as well.

Corporate Services accounted for 54.4% of revenues during this quarter. Sify had still further validation for our market leadership in IP VPN services in India. We had significant new wins and repeat businesses from many customers for corporate connectivity services during the quarter. Our Application Services business also had a number of gains for integrated services around Document Management Systems. And other new business gains included a multilingual Sales Force Automation system for Plethico, an online content management system for Oxford University Press, an alumni portal and an integrated messaging platform for XLRI, one of the top Indian management institutes.

SifyAssure, our information assurance business, has commenced a detailed Risk Assessment for a large Telco in the Middle East, post the high level Risk Assessment carried out two quarters ago. SifyAssure also won the Information System and Application audit for the Core Banking System for the State Bank of Mauritius and a vulnerability assessment and penetration audit for a central bank in the Middle East. Key wins in India included orders from ICICI Bank, Godrej Infotech, Apollo Health Street and an Audit service for the National Housing Bank.

Sify's subsidiary, Safescrypt, expanded its portfolio of services to offer comprehensive data security solutions to the Indian Market, through alliances with Safeboot, Swivel, E-Lock & Seclore. This division has also developed an innovative solution for companies to migrate from issuing paper-based Purchase orders to Digitally-Signed Purchase Orders. Forum, Sify's supply chain management solution, deployed a Sales Portal for the first time to a food product major in India. Forum has also finalized a marketing alliance with Intel for bundling Forum with Intel-powered PCs targeting the retail small and medium enterprise sector. That brings me to the end of this section. I shall now hand over to Ram for closing comments. Ram?

Thank you, George. In closing, I'd like to reiterate that the outlook for the Indian economy continues to be positive. Increasing foreign exchange reserves, faster growth in services, strengthening manufacturing activity and higher corporate earnings in the current fiscal point towards continued growth this year. India's GDP, as most of you know, grew at 8.1% for the first quarter of this fiscal with a 7% expected GDP growth for the full year.

New initiatives such as a $200 PC launched by the Indian hardware manufacturer sealed (ph) in association with Microsoft, a statewide area network sponsored by state governments, and the continued focus of e-governance and broadband penetration at the central government all indicate that the Internet and network sectors will continue to see increased growth.

I will summarize the results for the second quarter by saying that the accelerated growth in our businesses indicates we are well-positioned to continue to grow through this fiscal. The markets are growing. We have made investments into our network, manpower, marketing and bandwidth to continue strong growth towards -- to move towards sustained profitability. I'll now turn the call over to the operator to open the line for questions.

Thank you. (Operator Instructions). Our first question comes from George Mihalos with Gilford Securities.

Good evening, gentlemen. Congratulations on a very nice quarter. Several questions, if we could start off with the corporate side of the business, can you speak a little bit as to pricing trends within your VPN business? There's been some talk of BSNL lowering tariffs there. How is pricing right now?

Yes, George. Actually pricing for IP VPN services have over past several quarters -- if not more than a couple of years -- steadily declined as a result of tariff reductions not just by BSNL, but by various other telcos in India. What we've been able to do progressively is make sure that the effects of these price reductions have been less than the impact to us in terms of cost reductions as a result of the tariff reductions. By and large, that trend we expect to continue, go -- changes in terms of pricing or pressure from telcos can never be ruled out, going forward. Our gross margins, George, on the enterprise side for the IP VPN business has remained similar to the previous quarter.

Okay. That's helpful. And with regard to the portal business, can you give us a breakdown between what -- how much of that $900,000 is advertising versus e-commerce?

Just a moment. Advertising is actually 57%.

Okay.

And of that, e-commerce, broadband content, and now we're seeing a significant increase in mobile content, up 45, 45 (ph). All of that is the rest 43.

Okay. And can you talk a little bit about -- as you're adding on new advertisers, are you seeing most of the growth from domestic Indian companies or large international advertisers now?

We have a lot of international advertisers who are now setting up shop in India, including newly venture -- internationally venture funded companies in the Internet space. At the same time, we have a lot of Indian advertisers who are discovering online and figuring out that online makes a lot of sense to connect to their customer base.

And with regard again to pricing on the advertising front, are you seeing or are you planning on implementing any rate increases, which is something we've heard from some of your competitors in the space.

Let me go to rate list, the charges.

There has been a trend in which the rates have marginally been going up. I think as the number of users comes through our iWays and broadband, people are starting to see greater value through us. We will take a call on this maybe towards sometimes during the quarter. As of now, we do not see the need to take that up yet.

Okay. And just finally, can you talk a little bit about any future initiatives you may be thinking of implementing with regard to monetizing the iWay cafe business?

The iWays cafes are also e-commerce centers, they are -- as it is already being used substantially for say applications for running online exams, the SAT kind of tests, all of that, there's a lot of increase. There is an increase to come there and do day trading by stockbrokers. We are seeing ticketing and purchases like that happening now at the iWays. So more and more e-commerce starting to happen at the iWays. And we think that the trend is that we will see significant increase in the use of SifyMax and broadband music-related downloads and therefore related commerce coming out of the iWays.

Okay. Thank you. Great quarter, guys.

Thanks.

Our next question is from Ranjan Rajwada (ph) with Sigma Capital (ph).

Hi, guys. Congratulations on terrific quarter. I just had a couple of questions. In terms of volume purchases, should we use $4 million as a volatile in CapEx for third quarter basis?

Ranjan, we're not able to hear you. Your voice is breaking.

Should we use $4 million for CapEx on an ongoing basis?

CapEx.

Yes.

We did spend close to $4 million of CapEx this quarter. Substantially to meet our large enterprise orders and to fund some of the initiatives to take care of the broadband that we're looking at. We think we should substantially stay at this level going forward, that's our expectation.

Great. One another question, can you talk a little bit about the voice-over IP initiatives that you have in the cyber cafes and how customers are picking that up?

There has been a significant increase in the usage of the voice revenues coming out of two places. One is the iWay, and two are these independent telephone booth that we have created for Internet telephony. There are about 800 of them now that are functioning. And between the two, the voice revenues have grown 28% from the previous quarter.

Okay. And last question, you talk a little bit about pricing on the advertising front. Can you discuss inventories? Any trends on the inventory on the site? Are you seeing less inventory, more usage of inventory?

I think probably the key issue is that the home page is something on which inventory is getting more short and compressed. So I think we are seeing this across not just us, but across some of our competitors as well.

Great. Congratulations on a great quarter. Thank you.

Thank you.

Our next question is from Nirav Shah with Capital Financial.

Firstly, I have a few questions. First question is on the PR front. A lot of news items related to Sify appear on the Indian media, but they don't -- do not appear on the U.S. media, like interviews from you and the repeal of - TRAI's recommendation of the repeal of VPN Tech. All those are very important news events and why are they not being like published in the U.S. media and -- so that the investors here can benefit from that? And also, there are many times when we have -- excuse me -- so many questions and we don't get reply from the Sify personnel or from the other agencies that you have contracted with. Why is that the case?

I think -- I'll take the second question. We have, as a matter, of course, responded to all that come on Citicorp or through our agents in the U.S. It looks like Ranjan we have not seen what you have said or sent to us for whatever reason, and it seems to be a genuine slip up somewhere in the system, because otherwise we have been very responsive. So I'd like to apologize if you've missed out on any of your messages to us. But we haven't seen it. So if you send it to us, we will respond.

On the PR, all significant news we do put on the international wires. About the IP VPN, TRAI is only a recommendation. And we are waiting to hear what the government response is going to be. We are hoping it would be somewhere in line with the TRAI recommendation, but our government they have taken their time over it and we are waiting for that. Whether good or bad, we will share that immediately with all our people around the world.

Very good. What's the purpose in publishing the news events and interviews in the Indian media versus the US media when it -- something when the companies were not even listed in the Indian Stock Exchange?

We do this. I think we've been putting news out on the international wire. I will go back and review what we have missed. But otherwise as a matter of course, we have been putting there. We do have a number of customers in India who'd like to know what is happening with Sify. So we do put out news releases here that is of value to our customers both retail and enterprise. But otherwise we do try, and we will look at how to extend that based on your feedback now.

Okay. Thanks. The second question is on broadband. Like the company doesn't own any international broadband as well as domestic broadband, the government has not opened up the last mile. Also there has been problems with the service, like the reviews are really bad about the service like it goes down. Also you also have to rely on the CTO's, who in turn like most of the times are not playing well. And the service quality is supposed to be even worse than the government-owned entities like MTNL and BSNL. And the company has lost money in dial ups, so are we losing money again in broadband where we could invest this money in portals and -- compete with the likes of India Times and Rediff?

Okay. Well, let me try and answer this as follows. Firstly, broadband represents a huge potential opportunity. With the present ARPU of about 350 rupees a month, a 1 million customer base would represent approximately 400 corers of revenue, and therefore, it's a very large market for us to ignore.

Secondly, the initial -- the kind of pricing or the non-level playing field we saw in dial-up doesn't seem to exist in broadband. It's far more possible to turn a profit and to have a growing share of that market, provided we do certain things right and we are able to get the last mile problem, which is the single largest problem facing any broadband provider in India. If you're able to solve that then, of course, it's likely to be a good business.

You're absolutely right. Our approach towards solving this last mile problem has been to go through cable operators. We have signed up, I think, about 1,200 cable operators so that itself is an indication of the fact that our service, while it might have beating (ph) problems and might have some issues with a small percentage of the customers, we do have lots of very satisfied customers. We use our services quite a lot.

So the fact is that we go through cable operators, for the last mile, we do need to work with them, we need to educate them. But they really access 60 million-plus homes in India in terms of last mile. So overall, the broadband potential is something that we cannot afford to simply ignore, given our ability to solve the technology problems relating to billing, management of customers, et cetera, which we have already done on the cyber cafe site. So what I feel -- focus on portals continue. We do continue to make investment on portals. We are seeing as we spoke about strong growth in the portals area. But, I think we looked at all of this and decided it's not an either/or scenario. We really think we could do both.

Okay. So when do you expect to make profits through your broadband?

The cost on broadband as the scale goes up have -- as you look at the segmented cost - you'll see that the broadband side of our business has cut cost substantially. We need to scale the numbers and it looks like that we have managed to get the last managed solution a lot more stable. So I guess as the numbers go up, we don't tell about the future too much, as we have been cautioned. So I would think that we're in the right direction, the costs have come down substantially, the numbers are going up. And we are, I think, in this way of providing solutions, a clear leader, I think it's just a matter of time.

Okay. And one last question on portals, like Rediff and India Times are making tremendous progress in their portals. Whereas, Sify has not even able to get the basics right, like the Alexa, which is an authority on ranking and everything, ranks simply to be the -- like to be 97% of the sites are faster than Sify. The performance of Sify Web site is poor. It is not even able to launching services like auctions that Rediff has done. So how do you like, even if you can't get the basics right, how do you expect to compete with the likes of Rediff and India Times when they are improving constantly?

Well, I think, I would like to address this in two parts. The first is, Alexa. Alexa itself is a kind of software, which has to be downloaded. I would estimate --

No, it's a Web site actually. You can type in the Sify and it will give you the ranking for Sify, dispute for Sify, and that you don't have to download anything.

Yes. You have to actually download the software, which resides on your PC and it samples that software and arrives at conclusions based on that sample. As a matter of caution, we do not allow Alexa to be downloaded on any of our iWays, for example. So I think a very large percentage of Indian cyber cafe usage does not reflect Alexa at all.

Overall, I would think that there are two big reasons why Rediff shows up disproportionately well on the Alexa. One, it is a single monolithic site. We have several URLs and domain names under our overall site, and therefore, that should be one point. And the second is that in our entire network, we do not have software such as Alexa, which maybe sometimes even, questioned as being a Spyware because it does pick up information without the user's cognizance. We do not allow it to be running on our network. And so these could be the two main reasons.

To answer your other question about services, we have a full range of services as you are aware including shopping. The shopping site has been completely revamped, mail and -- I think the key question is do we have the services that work, that have the maximum impact among customers. We have all those services. And we have also been the first to launch completely progressive channels such as SifyMax, which is a very large broadband site and it has actually been something that, I think, others will, of course, follow eventually. But we've had a clear lead in. So there's a lot of activity happening around portals and we're making those investments as you can see, and is paying off in terms of revenue growth there as well.

Right. But you just mentioned that you have all the things you would probably need, but so you don't have auctions, you just link to a third-party auction site. You don't have matrimony, which is like one of the most important thing that Indian consumers look at -- it links to a third party site, like lot of your basic stuff links with third party softwares or third-party Web sites. So why don't you develop like your own search, your own auctions, your own matrimony site and everything?

Well, it's often a balance between having the number one and number two matrimonial sites advertised on us versus setting up our own sites and thereby, probably, giving up on some good advertising revenue. The fact is that some of these verticals have already been created over the last five years and have reached a reasonable stage of potential and growth. So yes, we evaluate every single vertical all the time and sometimes we add new ones. But it depends therefore in each case on whether it makes sense for us to do that economically.

Okay. Thanks a lot.

Our next question is from Zaid Kadeem (ph) with Kadeem Capital Corporation (ph).

Hi. I read the news release and for some reason I didn't notice per share results, either cash profits or GAAP loss. Could you please tell me what they were?

Per share?

Right.

It is $1.4 million loss for the quarter-- total loss.

Total loss. But what is it per share?

Yes. 35 million share for today

It is $0.039 -- that is $0.03 -- $0.03.

Right. Yes, $0.04. Okay. But what about the EBITDA profit? I assume it's -- this is around $0.03 also?

That's right.

Yes. Okay. Yes. Generally, this is an important factor that people like to know and they're not so handy with the complicated calculations?

Thank you. We will include that the next time. Sure. Thanks for your feedback.

I appreciate that. The other thing is, do you have any interaction or joint ventures with the various international Internet services like Microsoft, Yahoo, Google, or whoever?

Yes. Google, we do.

Yes. We do have Google appearing through ad sense and on our -- on several of our pages. So we do have a relationship with Google. Google also powers our search results. But this is a -- both these are commercial agreements that we have with them. We do not have any other agreements with Microsoft, Yahoo, or any of the others. eBay in India is a big advertiser on our site.

I see. The other thing is up until now, you were consistently showing revenue growth somewhere between 30% and 40% quarter-over-quarter. Could we expect that to continue to grow, decline? Could you give us the general outlook what you -- how this growth should look in the future?

I could talk a little bit about some of the industry data. Internet

I would appreciate that.

There are three or four drivers as you know for the Internet to grow. The first is the PC. And fortunately, the PC prices in India have been coming down from about $500 to now about $200. That is starting to see a significant uptick in the usage and the sales of PCs. So that is one. Two is that bandwidth prices have been coming down steadily year-on-year by -- between 25 and 30%, both domestic and international bandwidth. That is again helping costs come down for the users.

The third is that regulation generally has been reasonably favorable on the Internet industry. There is a lot of focus to grow broadband in the country and we're starting to see relatively favorable regulations. There are a number of applications now starting on e-commerce, not just e-government applications, but a number of other applications that are starting to happen where our iWays and others are starting to be put to better and better use in terms of online ticketing and railway ticketing and other commerce related applications also. So these are all indicators.

These local market research companies are forecasting that the Internet users should more than double. They're forecasting that it should more than -- double more than that over the next two years, and that seems to be an inflection point in the growth of the industry. We normally look at India versus China, and there is a feeling that we maybe between four and five years behind. And therefore, again it looks like timing point. We are at an inflection point for the growth of the Internet. And the different revenue streams we have been investing behind all these years, all of them seem to be poised, hopefully, to take advantage of this opportunity.

Yes. And you didn't mention the corporate side, which is the biggest portion of your revenues. Could you elaborate some about the corporate end?

Yes. The amount -- since the bandwidth prices are coming down there also, there is, again, an increase in the demand and it is again forecast by research that there should be cumulative growth there of over 30% over the next few years. So that, again, looks like a high growth area.

You mean, 30% annually?

That's right. Over the next foreseeable future is what IDC and the others have been seeing.

Despite this -- in my opinion very solid growth, you still show losses on a GAAP basis. Can you give us a number of revenues where the breakeven point will be reached on a GAAP basis?

On revenue of --

At what revenue level would you breakeven start to show a profit on a GAAP basis?

Well, I don't think we can really make a comment about that.

I think there are two ways as you know that we could get comfortable. One was to stay at the same revenue and cut a lot of costs, which would then impact our future. Significantly, especially when we are looking at all indicators of an inflation point in the growth opportunity. Looking at the trends as you have seen and how quickly you calculated the EPS, I think this is easily forecastable by you. We have not given out that number to anybody yet.

Okay. Thank you very much.

Our next question is from Quint Slattery (ph) with Synergy Peak Management (ph).

Hello. Just a quick question guys just going off the last questions from the previous caller. In terms of cash, I mean, if you're not going to provide a breakeven standpoint from a revenue basis, are you going to have to raise more cash longer term in order to, kind of, keep up the CapEx? Or do you have a sufficient amount of cash now and you're not going to dilute shareholders?

We don't need cash to meet our current budgets. The cash that we have is adequate.

So you guys have no future plans on raising additional cash?

No. Not immediately.

How about in the next 12 months or so?

Unlikely.

Great. Thank you very much.

Our next question is from Himanshu with Shah Capital Management.

Yes. Good morning. I was late to the call so I may have -- I may have a paaded question over here. You guys you know I talked to Anil a while ago, and it seems to me that you guys are all over instead of having a clear focus on -- whether it's on portals or retail Internet access or interactive or corporate. The question, I have is -- couple of questions -- one is when are you guys going to have an enhanced search engine if at all in the next 12 or 24 months or so? Or what are the plans at Sify for that?

We have a search engine called Khel -- I mean Khoj -- and we have just started looking at enhancing that. As of now, as you know, we work with Google on the search and we are trying to see if having a local search of our own would give us intrinsic advantages in the advertising revenues. But we have started beefing up Khoj.

So when do you see -- I mean, you talked about $200 computers in India and less than 1% of the population has computers today. The demand is going to be phenomenal year in and year out based on what we have seen in other countries. So what is the timeframe that the company has internally and that you would like to disclose I mean intermediate term whether it's one years, two years, three years because I know you did hire somebody, a couple of months ago for your portal business, so I assume that you guys are looking pretty seriously into that. The question is, what is the timeframe that we are as an investors looking at that we could expect that from Sify?

For what?

For the search engine.

There is a search engine as I said called Khoj. We are evaluating, like I said earlier that whether Khoj should be beefed up significantly more or should we work with Google, we would have maybe better sense over the next few months, as to how we would be goes forward. And we will have greater clarity when we speak next maybe...

Okay. You talked about spending lot -- you guys have spent a lot of money on different initiatives at Sify. Are we going to continue to see this kind of CapEx for the next couple of years or you are pretty much at -- any comments on that?

A couple of quarters -- I think you would see similar levels of CapEx as I mentioned CapEx has been invested behind what I think is going to be very fast growing opportunities. All indicators are that the Internet market is starting to grow in India. All research seems to indicate, as you correctly pointed out, a $200 PC is a nice to help grow the market. And therefore, it would look -- and here we would look very silly in front of investors like you, if we stopped investing just at the time of inflexion. And therefore, at least for the next couple of quarters we expect to make investments in some of these growth areas.

You haven't broken down or I don't know whether I -- again this could be a repetitive question here -- but how are you spending this CapEx? Is it mainly going into the interactive services and retail Internet or it's kind of proportionately to your revenue breakdowns?

It's proportionately, because it's significantly going into the network.

Okay.

As for reach, for the broadband, for the cafes, as you know, our network runs nine to five for the enterprise in five to nine for the consumer. We kind of stretch it across both sides of our business. And therefore, we've been beefing this up both for reach and for enhanced services. So it's a cross --

Okay. Just a -- how many employees did you have as of September 30th?

Up to 900.

1900

1900?

Yes.

And are you guys, I mean, what kind of employees that you, I mean, how many employees are -- is the company planning to hire in the next 12 to 24 months? Based on the growth were that you guys are seeing?

Not much at an increase about this.

Okay. I know you didn't want to talk about your break-even point, but can we expect GAAP profitability next year?

Yes. We are looking forward to a good year.

I am talking about 2006 fiscal year -- 2006, 2007 fiscal year.

As you know, we do not give guidance at all, and therefore, that's a question that - you're make a difficult for us to answer.

But -- if you are not adding that many employees because you have and if your revenue continues to grow at the rate that's your guys at the market agencies are been predicting, I think it could straight go to the bottom line if it's -- I mean would you agree with that or no?

I think, inferences are - therefore each one of us can draw. We have said in my press release that we are definitely focusing on realizing that net profitability. That's our key focus, as we continue to grow --

Okay. One last question. Is there any plan to see kind of sell the corporate services business which does contribute more then 50% of your revenues and just focus totally on your retail internet interactive services and portal business, which will give you a lot of cash. I mean, you already have sufficient cash, so you don't have to access the capital markets and you can grow quite dramatically. And you would be more of a focused company. Is there any plan that has been discussed at the Company?

I think, we are at a time when we have built our business on the common technology infrastructure that leverages both the enterprise and consumer side of our business. The enterprise side looks so profitable because we've been able to leverage resources across both businesses. At a time when we would like to focus on the growth with the opportunities being there, the timing may not be right to talk of any sale.

On the contrary, we may want to consolidate and grow faster. And I think the timing may be wrong to talk about any sale. I think we are very focused in what we do. It may look from a distance that there are multiple businesses. Over the years, we have consolidated to significantly Enterprise VPN managed services and on the retail side to looking at providing through cable into the home and through the iWay. And then of course, the interactive or theportal service that runs across all these businesses. And these are all growth areas and that's what we've been focusing on.

Thank you.

Our next question is from Greg Wegner, a private investor.

John, I was wondering whether you could talk about a possible future of stock offering in India? From reading the press it sounds like the government is going to require us to do that. I'd like to know what plans we have for that, what timeframe we're talking about?

And as a holder of ADR share in United States, I am concerned about dilution. And obviously it would be wonderful if we could come up with some creative way to take advantage of presumably strong demand for Sify shares in India and help those of us that have been ADR holders for many years and have lost a fair amount of money by holding shares for so long. Could you comment about any of that?

There is no urgency to list in India. What the law did say is that there is a window of three years for companies that are seeking to raise capital in the market today. We have a window from the time of profitability for three years to list in India. At the time we list in India, we would be prudent to look at both primary and secondary offerings for sure. And we'll keep in mind people like all of you, Greg, who have had the confidence to hold these shares for a long time. But it is not a plan to list in India or increase dilution of our shares imminently for currently running our business.

Thank you very much.

Okay.

Our next question is from Rengan Rajaratnam with Sedna Capital.

Hi. One question of concern that I think as an investor I have is one of your venture capital firms must be trying to monetize the original investment and has been selling shares. Any sense of where we are in that process. Are they done selling? Will they continue to sell? Any feedback of it provided would be helpful? I'm sorry. I guess the question had to do with your venture capital investors selling your stock. There has been an overhang on the company. I was wondering if you have any sense of when they will be done or if they're close to finishing?

As far as the company is concerned, the sponsored area program was completed and the shares have been sold from them. That's over.

Okay. It just -- I guess it seems like there's one of your venture investors has been selling shares and is putting it overhang on the stock. I was wondering if you had any discussions -- just kind of any sense of when that seller would be done or whether, you know, with the end of that cycle?

It's done. It's over.

Okay. Great.

They're no longer shareholders of Sify.

Okay. Great. Thank you.

Our next question is from Nirav Shah with Capital Financial.

I have couple of more questions I forgot to ask. Do you think -- do you guys have any plans to sell stocks of the company like it holds, I think, around 30% of the company stock? So do you think like the other investors they would want to sell its stake any time soon?

It is -- one you're asking the wrong set of people, but you're asking -- you should be asking the shareholders. But however whatever indications as you have seen over the years, they have actually held on to their shares. And whatever dilution happened was because monies came into Sify two or three years ago, and they have actually held on to their shares. I'm looking only at behavior factors to say that they have held on to their shares.

Okay. And my other question is the perception that allows -- investors like me have is that the management team is not performing to its best like they made certain investments five years back which cost the company a lot of money. And they're making investments now which is bound to cost the company money like investments in broadband whereas the entire focus should be on portals. So I mean we haven't seen an increase in our stock price for a few years whereas the Indian economy is growing so fast our stock price has stuck at the same price for a long time. And also we've been losing cash rapidly. We're not making any net profit. So what's the use of growing so fast whereas you can't make money for your shareholders?

Valid input. We will see take that input and see how best we can respond in terms of working our results.

Okay. Thank you.

There are no further questions in queue at this time. There are no further questions at this time.

Thanks for joining us on the call. And we look forward to interacting with all of you in next quarter, same time. Thank you and goodbye.

This concludes today's conference. Thank you for your participation. You may disconnect your lines at this time.