Wipro Corporation has decided to enter the competitive home internet services market early next year through a joint venture Wipro Net with the $ 8 billion Dutch Telecom operator, Royal Dutch Telecom.
At first glance it seems irrrational why Wipro should venture into an extremely competitive business with VSNL/MTNL practically dropping rates every fortnight. The possible answer for this could be the freedom given to internet service providers (ISPs) to use foreign satellites and KU-band for Internet connectivity. This will enable the new ISPs to directly connect through their own gateways.(Till now, all private ISPs could only use the gateways of VSNL and DOT/MTNL for Internet connectivity.)
Satellite broadband delivery is very efficient and cost effective: a satellite beam can cover very large areas and connection can be provided easily with no need to roll out extensive terrestrial plant and equipment.
The company also plans an IPO three yearís down the line where the parent could itself divest itís stake and encash its investments. Wipro is being cautious, understandably so. Itís putting a finger into the internet pie without burdening the balance sheet of Wipro itself.
Wiproís premium valuations are expected to sustain owing to the quality of its software services and the fact that 75% of its stock is held by its promoters.
LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.
SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.
Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India. Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: firstname.lastname@example.org. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407