We plan to scale up to 50 lakh users in India in next few years: Excitel CEO

Hemani Sheth Mumbai | Updated on December 21, 2020

Vivek Raina, CEO & Co-Founder

Homegrown broadband company Excitel is planning to expand operations in India, targeting 50 lakh users over the next few years, according to Vivek Raina, CEO & Co-Founder. In an interview with BusinessLine, Raina discussed the company’s plans for expansion and the market potential for wireline broadband in India. Edited excerpts:

What are Excitel’s plans for expansion in India? What is your vision for the company in the coming year?

Besides expanding to two-three big cities, we’ll be focusing on Tier-B and Tier-C towns because there’s a dearth of good quality broadband services there. We want to expand to at least 15 cities in the next seven to eight months. The growth areas are primarily going to be the North and the South.

What will be the investment for expanding to these new locations?

It depends on the size of the city and the market. For these cities, we will be investing ₹50-100 crore for the next six months.

Will you be raising funds to meet the requirement for your expansion plan?

We are currently in discussions with global and Indian investors for our Series C round of funding. We have previously raised a total of $6 million from European investors and have been able to achieve an annual revenue run rate of over $35 million, demonstrating our ability to efficiently deploy capital. We expect to raise $20-25 million (₹150-175 crore) in this fresh round to help us scale from five lakh users to 50 lakh users over the next few years.

Also read: Excitel offers ‘Work from Home’ broadband plans for the second phase of lockdown

Earlier this year you had said that Excitel will begin converting legacy infra to fibre next year. How much will you be investing in this? What share of the investment will the local partner be taking up?

We started around one and a half years back to convert all our offerings into fibre. Prior to that, all the investment in the last mile network was made by the partners. But now with fibre, we decided that the investment on all the electronics used in the last mile network and even the partners’ network will be made by Excitel, while investment on packing fibre will be made by the partners. That way we can control the quality of services being delivered to the customer. So, the investment share will be 60-40.

How many users have now moved to fibre-to-the-home (FTTH)?

We have 1.2 lakh users on FTTH now. And more sales are happening on FTTH. By the end of this year, we’ll stop legacy sales and will only be adding FTTH connections. We estimate this number to be around 3.5-4 lakh, by the end of next year.

Laying fibre is challenging and an expensive proposition. What is the minimum return on investment period?

We have a revenue-sharing agreement with all these partners. They get a revenue share from each package on the network in the area. They can recover their investment in less than six months. For Excitel, it takes longer, because we also invest in marketing and sales. So, the payback period for us is around eight to nine months.

What is the average revenue per user (ARPU)? Has it gone up in the last two years?

Our ARPU hovers between ₹450 to ₹500 because we keep it under this level of specificity. We want it to be accessible and affordable for everybody. The ballpark figure for us is ₹500. We don’t want to go beyond that. It was our endeavour not to increase the price when we convert the user into FTTH-oriented technology. Price should not be a limitation for the customer to enjoy better technology.

Also read: Indian PC market grew 9.2% to 3.4 million units in Q3 2020: IDC

How challenging is getting the right of way permissions from local authorities to lay fibre? What can be done to make it easier?

There are challenges in that sense. But, since the last mile fibre is laid by the partner, our challenges are much less than probably what telcos face in terms of permissions. Usually, these partners are cable TV operators or internet operators in the area. So, they already have a wire. They just replace this with the fibre wire that we tell them to install. For them, it’s not a big challenge comparatively.

We believe that each and every household needs to be connected to FTTH, and therefore, the rules, the guidelines that are set, they need to be crystal clear and transparent for everybody to follow. It has to be regularised and consolidated at some point.

How has the pandemic impacted your business? What has been the impact on revenue?

We added around one lakh users since the first lockdown was announced in April. There has been a jump of 55-60 per cent ever since in our revenue. Revenue has been increasing. Demand would be consistent. I don’t see demand going down to pre-Covid-19 levels. The revenue growth will be consistent in accordance with the user base growth and subscriber growth.

How has the data consumption pattern changed among Indians? Will the rise in mobile data usage impact broadband?

Prior to Covid-19, selling wireline broadband used to be a concept sale. After Covid-19, when the lockdown was announced, customers realised that mobile data is very limited compared to wireline data and the needs that crept up during lockdown cannot be fulfilled through mobile data. For that, they need wireline. Therefore, there was a boom in the take-up rate. There was quite a big surge in demand.

The demand will not be as high moving forward, but it will be better than the pre-Covid-19 levels.

Wireline broadband is at a very minimal stage in India; we are two crore total connected households, for around 60 crore households. The market potential is huge.

How do you plan to compete with other internet service providers in the country?

There are not many players like Excitel out there because we have a model where we use partners. Traditional telecom companies have a fully-owned last-mile network. By design, they have a problem as 30-35 per cent of India is structured, while 70 per cent is unstructured.

A majority of companies that do business in India can power urban India to some extent, but they will mostly cover high-income areas or structured areas. That’s where our model comes in. We have partners in every locality. And these partners are local people who can lay the fibre in those areas. At the same time, we don’t compromise on technology, we also are on FTTH. Therefore, we scale faster and cheaper with the same quality of service.

Published on December 21, 2020

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