Chennai: The city-based satellite messaging company Delta Innovative Enterprises is rewriting its strategies, impacting all its operational areas like technology, finance, products and marketing. The measure follows the rejection of the companys loan proposal by IDFC.
The underlying principle for the new strategy is to derive and deliver maximum benefits at a minimum cost. Popularly known as Deltagram, the company on the technology front has inked deals with cellular companies to use their network for a fee.
Agreeing that the per-transaction cost of using cellular network is costlier than using its own V-Sats, Deltagram executive director N Vijayashankar says: This enables us to reach more towns and cities at a cheaper cost than setting up earth stations. According to him the company will also be shifting some of its 50 V-Sats to increase its reach. We also use the Internet and radio frequencies so that our last call in our messaging loop will always be a local landline call cost.
Deltagram MD R Kothandaraman and P Vaidyanathan of the Chennai-based Integrated Enterprises, a leading fixed-deposit mobilising company, promote the Rs 17-crore equity-based company. India Direct Fund has contributed Rs 4.4 crore to Deltagrams equity while IDBI has lent a term-loan of Rs 5 crore.
The company started its e-mail messaging services in Chennai in 1997 on RPG Sprint Network. In 1998 end Deltagram expanded its services to other three metros. It was at this time that Deltagram got bitten by the V-Sat bug. The company initially connected all the major cities, and the messaging system was simple and economical.
For instance, if a person in Chennai wants to send a message to another in Mumbai, all he as to do is to visit Deltagrams Chennai office or its franchisee office and read out the message. The message will be transmitted to the companys Mumbai node through its V-Sat network and will be delivered or faxed to the receiver for Rs 15 (now reduced to Rs 7).
The initial success encouraged the company to draw a Rs 45-crore expansion plan to network the entire country with 250 V-Sats. Deltagram nurtured ideas of morphing into a parallel postal department, offering several value-added products at the retail level.
As per the financing scheme, the promoters equity contribution was Rs 7.5 crore and a similar amount was supposed to be raised from franchisees. A proposal for a Rs 30-crore loan was submitted to IDBI and IDFC. While the company went ahead with its expansion and started appointing franchisees, money from institutions didnt materialise. And differences over offering guarantees saw IDFC backing out.
The other misadventure at this point of time, resulting in a cash-flow problem, was the companys Rs 1-crore ad blitz sans any commensurate benefits. At the retail level, a combination of factors resulted in franchisees losing interest in pushing the product forward. Firstly, Deltagram didnt have the prepaid call-card that could be sold by franchisees. It was a tedious process for its customers to go in search of a Deltagram franchisee, as their numbers were far lower and less spread out compared to STD booths.
The only major users were small-scale units. And franchisees were peeved at their principal for licensing such captive users. What sustained the hopes of the promoters were the companys 35,000 strong members, most of them corporate users, the products price point and the margin.
All its services like E-Call, E-Letter, Delta-Fax, TeleMail and Hallo are available for rates ranging between Rs 5 and Rs 10. For instance, the companys latest product, Hallo, a one-minute voice-mail service with a reply facility, costs just Rs 10. It was then the company decided to overhaul its business plan and strategy.
While one part of the whole new strategy is to use other modes for carrying the messages, the others include novel financing pattern to attract franchisees and new product-service offerings targeted at corporates and individuals. To attract the franchisees, Deltagram will be offering bank guarantees for a sum equal to the licence fee. The bank guarantee assures the franchisee the return of his money paid to Deltagram.
On the new products-services side, the company is now offering corporates value-added services like generating sales reports, based on the data supplied by sales representatives over the phone. The company is now offering this service to Godrej Soaps.
For individuals, Deltagram intends to launch more prepaid call cards - to be sold in all retail outlets - money transfer, debit cards, tele-commerce and e-commerce products in due course. These will be launched in phases as we continue to develop the necessary infrastructure, says Kothandaraman. To overcome the cash crunch, Deltagram is now negotiating with a nationalised bank.
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