Sify Technologies Ltd (SIFY) 2009 Q2 法說會逐字稿

Greetings. And welcome to the Sify Technologies Ltd Conference Call for the earnings results for the quarter ended September 30, 2008. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. (Operator Instructions). As a reminder, this conference is being recorded.

It is now my pleasure to introduce your hosts, Chris Chu, Director of Grayling Global. Thank you, Mr. Chu. You may begin.

Thank you, operator. I would like to extend a warm welcome to all of our participants today on behalf of Sify Technologies Ltd. I'm joined on the call by Ragu Vegesna, Chairman and CEO, CVS Suri, Chief Operating Officer and MP Vijay Kumar, Chief Financial Officer of Sify Technologies Ltd.

Following our comments on the results, there will be an opportunity for questions. If you do not have a copy of our press release, please call Grayling Global at 646 284 9418 and we will have one sent to you. Alternatively, you may obtain a copy of the release at the Investor Information section on the Company's corporate website at www dot 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 webcast in the Investor Information section of the Sify corporate website.

Some of the financial measures referred to during this call and in the earnings release may include non-GAAP measures. Sify's results for the year are according to the International Financial Reporting Standards or IFRS, and will differ somewhat from the GAAP announcements made in preceding quarters.

A presentation of the most directly comparable financial measures, calculated and presented in accordance with GAAP, and a reconciliation of such non-GAAP measures and the differences between such non-GAAP measures and the most comparable financial measures, calculated and presented in accordance with GAAP, will be available on Sify's website.

Before we continue, I'd 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 and 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 protection 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. Ragu Vegesna, Chairman and CEO of Sify.

Thank you, Chris. A warm welcome to everyone on the call once again. Thank you for joining us. I will commence with opening remarks on our performance in the first quarter of this fiscal year.

We continued strong growth in our Enterprise business, which grew at 13% over the previous quarter. We expect to continue to grow this business in the coming quarters despite the expected slowing down of the Indian economy to 6% to 7% growth going forward.

The International business remained at the same level as the same level as (technical difficulty). The challenging financial and economic climate while Consumer revenues declined by 7% over the preceding quarter.

A change to the e-Port brand identities being executed across the Cyber Café chain. While many new services for online fulfillments are now available to them, this will be followed by marketing and promotions in last quarter of the financial year -- fiscal year.

Our [services] were also expanded across many new cities, along with some new network expansions. New initiatives have been launched, as were planned by our Portal business. And we will see more such initiatives being launched in the subsequent quarters.

The work being done to enhance the site also resulted in growing traffic to the site. During the quarter, we completed and launched our new data center at Mumbai and installed Cisco CRS 1 routers in the country in our network core, taking us to the Next Generation Network Capability.

We also grew our network reach to 524 cities during the quarter, making our infrastructure one of the largest and most sophisticated of its kind in India.

I will now request Mr. Vijay Kumar, our Chief Financial Officer, to take through our financial performance of the quarter. Vijay?

Thank you, Ragu. And hello everyone. I shall now go into the details of our financial performance for the quarter.

Revenues for the quarter ended at September 30, 2008 were $34.40m, 6% higher than the immediately preceding quarter.

Our Enterprise business registered a growth of 13% over the preceding quarter. The International business was at the same level as the previous quarter. While the Consumer business revenues were 7% lower than the previous quarter.

Net operating loss for the quarter was $4.13m, compared to a net operating profit of $0.49m in the same quarter in the previous year.

Net loss, including exceptional items, was $5.65m. Exceptional items during the quarter amounted $1.52m on account of legal fees.

Additional expenses incurred during the quarter were on account of data center expansion and doubling of network reach over the last three quarters. This also increased current operating costs, whereas revenues will take time to scale across all the newly established locations.

We ended the quarter with a cash balance of $5.12m after capital expenditure of $6.73m during the quarter.

Expansion to attain critical mass is key to gaining a competitive advantage edge in the still developing Indian market for other services. Our timely investment in network expansion and in data centers will enable us to scale our business going forward.

The current environment also throws up opportunities for infrastructure and data center expansion at very competitive costs. Investment decisions will be taken to ensure the Company benefits from existing opportunities for growth in revenues or capabilities for competitive advantage.

The financial markets are, however, affected by the ongoing global financial crisis, which will affect the rate of growth of the economy and make access to capital increasingly a challenge in the current environment.

I will now hand over to Suri, who will take you through some of the key initiatives during the last quarter. Suri?

Thank you, Vijay. And good morning to all of you.

Our revenues for the second quarter were driven by growth in Enterprise Services, which grew at 13% over the immediately preceding quarter. Sify's order book on the Enterprise side continues to show a robust demand for services across connectivity, hosting, security and applications. And we expect to continue to grow going forward.

We launched our voice over Internet protocol carrier services for the back haul of international long distance voice traffic over our international and domestic network for telecom companies during the quarter. And have met with encouraging response and growing revenues. This effectively leverages our international long distance and national long distance licenses.

You will recall the national long distance voice traffic over our backbone infrastructure for domestic mobile operators was launched during the last quarter. New initiatives focused on the small and medium business segment, as well as the launch of our Software as a Service in the current quarter will add additional new revenue streams going forward.

Some large virtual private network and hosting contracts were won during the quarter from both existing and new clients. Our International service revenues were the same as the immediately preceding quarter. We have customer engagements in the funnel, however, and expect to grow revenues over the subsequent quarters.

We've launched day one services for the design and implementation of IP infrastructure during this quarter. These include virtualization, storage and Cisco advanced solutions, such as application acceleration, load balancing and firewall products.

Our eLearning business won the Brandon Hall Gold Award in the category Best Use of Virtual Worlds for Learning. This is the third time in a row that Sify has won the Brandon Hall Awards.

Some of the notable wins were from high profile customers such as a global computer retail hardware giant, a globally recognized provider of storage and data management solutions and a global leader in business intelligence software solutions.

Our consumer presence was expanded to 32 new cities across India during the quarter, leveraging the growth of our connectivity network. We expanded our presence, both in terms of e-Port Cyber Cafes as well as home broadband services. A significant step was the signing up of large cable TV operators for the delivery of secure broadband access services.

Our new initiative of an Internet access kiosk, branded as e-Port Xpress, looks set to expand with the appointment of a large distributor for Southern India.

SifyTalk, our VoIP international call service from home, was launched successfully across eight cities in the country, after an encouraging pilot launch in Hyderabad.

Broadband services are also being aggressively promoted with a price-warrior product to enlarge the subscriber base from where customers can be upgraded with other value produces and value added subscription services.

Work on the new e-Port identity is being executed currently and will be followed by marketing and promotions. With this, we believe the turnaround in revenues and subscribers for the Consumer business will bring traction by the end of this financial year.

We had announced our Portal business partnering with Google to launch online applications on aify.Com, using the GoogleApps platform a short while ago. Sify.com soft launched its new mail service termed World In Your Inbox or WIYI during the quarter. The new mail service enables users to personalize their inbox to become virtually their home page with an array of applications in addition to a faster and more efficient mail service. This is an extension of the current relationship with Google for online advertising tools.

A new interactive gaming site, branded as Antzill, on sify.com was launched with a range of games for online gaming enthusiasts. For the first time in the country, Antzill offers the opportunity for enthusiasts to not only play, but also to win prizes and build communities of gamers amongst themselves. The Antzill online games channel has grown to 350,000 visitors per month within 75 days of its launch.

We continue to enhance our portal's appearance and usability in keeping with trends and preferences with a fresh look and better user benefits to key channels like Sify Finance during the quarter.

Our Sports channel saw an increase in visitors, following its in-depth and comprehensive coverage of the Beijing Olympics.

Following the success of Indian Idol 3, Sony Entertainment Television continues to partner Sify Dot Com for the new season of Indian Idol 4. Indian Idol fans have unique opportunities for community building on the site and interactive participation with other contestants.

Sify.com has also tied up with new partners like Sahara One for the reality show Saas Ya Bahu.

I'm happy to report that the continuous enhancements we have affected on the site have resulted in sify.com showing a robust visitor growth of 36% in the first six months of the financial year 2008/'09.

This brings us to the end of this section. I will now hand over to Ragu once again for his closing remarks. Ragu.

Thank you, Suri. In conclusion, I would like to reiterate that our focus going forward is to sustain our growth in revenues, leading to profitability, along with these new initiatives across the businesses.

While our Enterprise business is growing robustly, we will be launching new initiatives across the Consumer businesses over the course of the following quarters.

We will also continue to make investments in expanding our infrastructure and service capabilities to attain critical scale, based on growing demand for our services.

I will now hand over to the operator for questions.

Thank you. We will now be conducting a question and answer session. (Operator Instructions). One moment please while we pause for questions. (Operator Instructions). It appears we have no questions.

We just had a question come in. I'm sorry. We have a question now just come in from Don Esby from Shah Capital Management. Please state your question.

Hello. How are you?

Hi.

I just wanted to ask you about the Yahoo settlement. What kind of positive outcome from the bottom line -- from a bottom line perspective should we expect when the Yahoo settlement gets finished?

This is Suri out here, Don. The matter is subjudice and we are not free to comment on it. So, I think we do need to wait it out.

Okay. Any type of -- how about a ballpark range, even broad, just so we can have for our models?

No. We're not permitted to do that, Don.

Okay. Okay. So, legally?

Yes.

Okay. Thank you.

Thank you.

We have no further questions. I'd like to turn the floor back over to Management for closing comments.

Thank you everyone for joining us on the call. And we look forward to interacting with you all through the quarter and around this time thereafter. Thank you.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. And we thank you for your participation.