The last two years have seen a turnaround in Viom Networks' fortunes, but the telecom tower company cannot afford complacency
An extreme risk-taker, a chronic optimist or a smart strategist? The jury was out on Syed Safawi when he joined Viom Networks, the country’s fourth-largest telecom tower company, as its CEO.
Consider the timing. It was May 2012, just three months after the Supreme Court, taking cognisance of the Comptroller and Auditor General of India’s concerns over the allotment process, cancelled 122 telecom licences issued by former minister A Raja. Among the 16 companies affected was Tata Teleservices, one of the several Viom clients entangled in this imbroglio; it also was—and continues to be—Viom’s majority shareholder.
“In one shot, almost 30 percent of our topline was shaved off,” says Safawi. The loss of revenue was a heavy blow to Viom which was already struggling with a debt of Rs 8,300 crore; it had been borrowing heavily to meet its annual interest cost of Rs 900 crore. Further, the company had ended financial year 2012 with a loss of Rs 350 crore. Amidst these financial troubles, it was dealing with a smear on its reputation, too. In 2011, Viom’s former company secretary Arun Bansal had alleged that the Kanorias, who were stakeholders, had diverted Rs 300 crore from the firm to “private institutions”.
Viom was formed after the merger of the tower businesses of Tata Teleservices and Quippo Telecom. The Tata firm holds a 54 percent stake; Quippo’s holding company Srei Infrastructure, owned by the Kolkata-based Kanoria family, has 18.5 percent and management rights; the rest is divided among a group of investors—IDFC Private Equity, SBI Macquarie, Oman Investment Fund and GIC of Singapore.
It is self-evident why many of Safawi’s well-wishers advised him against the move. But, as it turns out, he knew exactly what he was getting into.
Cut to late April 2014, when Forbes India met Safawi at his office in Gurgaon. There were no worry lines furrowing his forehead; instead, the smiling CEO was eagerly awaiting a company offsite in Kerala where 60 of his senior-most colleagues would join him to map Viom’s future strategy. A humdrum exercise in most organisations, such an initiative was not even a distant dream when Safawi had taken over at Viom.
“At that point, you could be a pessimist and say that this is the end. Or, the other way to look at it was to say that this is as bad as it can get. Every industry and economy has a cycle and things turn around,” says Safawi, who was executive director at Bharti Airtel and headed the wireless business for Reliance Communications after a long stint with beverage giant Coca-Cola India.
He chose to believe. And the turnaround came soon. Viom Networks announced its maiden profit—of Rs 80 crore—in FY2013. Detractors called it a flash in the pan. It wasn’t. While the topline has remained sluggish at Rs 5,000 crore, Viom’s net profit crossed the Rs 100 crore-mark in FY2014. Its debt, too, has reduced by Rs 1,500 crore.
Shareholders are relieved. One of them, SBI Macquarie, had invested Rs 1,400-crore for an 11 percent stake in 2010. “The sector was in its initial stage. Viom had gained scale and was in a good position to capitalise on the industry’s growth in the future,” says Suresh Goyal, CEO of the infrastructure-focussed private equity fund.
The events of 2012 could have proved him wrong, but Viom has weathered the storm well. “The company has become leaner and [more] efficient in processes and systems and in its response to the market… the team around Safawi has done well,” says Goyal.
His colleague on Viom’s board, Sunil Kanoria, also the vice chairman of Srei Infrastructure, is even thankful for the “blow” felt by the telecom sector. “It was actually a boon in disguise as it forced the sector to rectify its mistakes,” he says. Umang Das, chief mentor at Viom (performing an advisory role), adds, “Cancellation of 122 licenses in 2012 changed the paradigm for all tower companies, as also for Viom Networks. We had to reinvent ourselves.”
Kanoria, who had taken over as Viom’s managing director in December 2011 when the then CEO Arun Kapur resigned, had run the show till Safawi came in. And he knows a thing or two about what went wrong.
The company has also incentivised fuel contracts with its tenants to save costs. Earlier, Viom would just “pass through” the fuel costs to customers so there was no incentive to save. This led to diesel theft. To rectify this, it has established a fixed cost contract with its tenants, irrespective of the actual fuel costs.
(This story appears in the 27 June, 2014 issue of Forbes India. To visit our Archives, click here.)