Getting fibre to millions of middle-class homes in India’s chaotic cities is a tough ask. One has to contend with, among other things, stray cattle on the roads, dilapidated or non-existent footpaths, monsoon winds that can bring down tree branches onto overhead cables and competitors and malcontents who aren’t above pulling down your cables.
Atria Convergence Technologies, which provides fibre-to-the-home (FTTH) broadband services as ACT Fibernet, has braved all of this to become India’s fourth largest broadband ISP (internet service provider). Set up eight years ago, it is within striking distance of the No 3 spot. But its top executives have their sights set on more ambitious targets—they want ACT to be an indispensable platform, bringing everything from entertainment to home surveillance, to millions of households across India.
India is set to hold its biggest auction of wireless spectrum in September this year but the reality is that data in the country isn’t affordable for most people and any meaningful access to the internet, beyond checking WhatsApp and other not-so-data-heavy apps, requires some kind of wired connection. That is the premise ACT acted on years ago. And that is now paying off.
The people behind it
“Look at the biggest markets in any of the world’s most developed markets, and wired networks dominate economic activity,” Bala Malladi, chief executive of ACT Fibernet, tells Forbes India about why they had chosen a wired network, with FTTH technology.
According to Malladi, as everything goes digital and moves to the cloud, neither old technology such as the copper wires of yesteryear’s phones nor wireless broadband will suffice. And as consumers move inexorably from voice to data, he says confidently, “the real highway to the home is going to be built by us.”
That confidence is not misplaced. In 2009, when Atria acquired Hyderabad-based Beam Telecom, its growth was helped by the former’s 30,000 customers in the city. Today, ACT Fibernet has a 70 percent market share there with more than 550,000 connections as well a third of the market in Bengaluru, says Malladi. Their network is spread across 11 cities, including Coimbatore, where ACT launched about a year ago, Tirupati, Visakhapatnam, Vijayawada, Guntur, Eluru and Nellore. In August, ACT also entered the Delhi-NCR market, marking a significant milestone for a business that has largely operated in South India so far.
The company has over a million broadband customers and is the biggest such provider among non-telco ISPs, adding 100,000 subscribers every four months. Including the telcos, ACT stands fourth, after BSNL, Bharti and MTNL. As on May 31, the top five wired broadband service providers by number of connections were BSNL (9.89 million), Bharti Airtel (1.79 million), MTNL (1.10 million), ACT (0.99 million) and YOU Broadband (0.55 million), according to data from the Telecom Regulatory Authority of India.
When they started, “broadband was defined as 256 kbps and we thought 1 Mbps was a good story to start with,” founder and managing director CS Sunder Raju said in February last year at an event to mark the rebranding of the company from ACT Broadband to ACT Fibernet. “In 2010, we thought we’ll break that mould and be a 5 Mbps company. Every single year, we’ve had to redefine that. We moved from 5 to 10 to 15 Mbps and today we have a 50 Mbps offering,” Raju, 59, had said. Now, the company is offering 100 Mbps speeds.
A computer-scientist-turned entrepreneur, Raju’s conviction was clear. “Society, we believe, will go through a disruptive process of re-engineering itself in the way we lead lives, and at the centre of all of that is this digital environment that will make it happen.”
The 48-year-old Malladi, an FMCG veteran with some 18 years at Unilever, has been CEO of ACT from 2008, which is also when India Value Fund Advisors (IVFA) first invested in ACT. IVFA, which made subsequent investments as well, now controls ACT along with private equity firm TA Associates Advisory.
In July 2015, TA Associates invested $200 million for an undisclosed stake. The transaction valued ACT Fibernet at $550 million, Malladi says. Around the same time, IVFA’s existing fund, called Fund 3, also exited ACT while a new one, Fund 5, bought into the company, alongside a few other investors in a consortium called Argan.
“Our investment horizon is six to eight years... with such a long horizon, it is key for us that the companies we back have enough headroom to grow over that time frame and beyond,” says Dhiraj Poddar, co-head of India at TA Associates. “We look for industry leaders in sectors or segments where we see a very large unaddressed market, with a high unmet need and work well with professional teams. ACT, for us, met all of these criteria.”
(This story appears in the 16 September, 2016 issue of Forbes India. To visit our Archives, click here.)