INDIA BUSINESS WORLD - MARCH 2006
THE MONTH THAT WAS

SIFY CAN CALL ON TELCOM FIRMS WITH INVESTMENTS

The Foreign Investment Promotion Board (FIPB) has cleared Internet, ecommerce and network company Sify's proposal to invest in downstream Indian companies that provide telecom services.

When contacted, the company said the proposal was to obtain permission to offer VPN services only and it has no plans to get into telecom services. ``We are an Internet and data services company. We had to apply for National Long Distance (NLD) and International Long Distance (ILD) to provide VPN services. We have got this. We do not intend to get into telecom services,” a company spokesperson said.

With the approval in place, Sify would join the likes of Bharti, Reliance, VSNL and BSNL to operate in this segment. Even Essar had secured permission recently to operate in the segment. Satyam Computer Services recently sold its entire stake of 31.61% in Sify to Infinity Capital Ventures, a company controlled by Silicon Valley entrepreneur Raju Vegesna. In total, Infinity now holds 40% stake in the Nasdaq-listed company.

Sify, being a 100% foreign owned company, could not apply directly for NLD and ILD licences. To obtain such a licence, a company has to have less than 26% foreign ownership. The existing regulations stipulate that not more than 74% of the issued, allotted, subscribed, and outstanding share capital of the company shall be held by NRIs.

According to the company spokesperson, Sify created a separate company to get the licence. The Internet service provider's 100% subsidiary Safescrypt, which issues digital certificates and provides public key infrastructure enabled services, applied for the NLD and ILD licence.

Early this year, Sify sold 26% of its stake in Safescrypt to the Visakhapatnam-based Infinity Satcom Universal for $3.1 million in cash. Safescrypt was renamed Sify Communication. Sify holds a 74% stake in it, and the rest is held by Infinity Satcom.

Infinity Satcom is owned by Anand Raju, brother of Raju Vegesna, the chairman of Sify's board of directors and principal of Infinity Capital Ventures. Sify has 1,50,000 broadband subscribers and 3,100 iWay cyber cafes in 149 cities across the country. For the cyber cafes, the company claims it had one million users in the last quarter.Sify is also offering remote infrastructure management services to overseas clients.