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Tata Communications. I extend a warm welcome. Thank you for taking the time out to be with us. As always, we truly appreciate your interest in Tata Communications' growth story. I'm Vipul Garg, Head, Investor Relations for Tata Communications. Let me begin by introducing members of management joining us today. We have Vinod Kumar, Managing Director and Group CEO. We have Pratibha Advani, Chief Financial Officer; and we have James Parker, who is our Chief Customer Officer. Before we start, I want to touch upon the safe harbor statement prior to moving ahead. I would like to remind everyone that anything we say today that -- which reflects any outlook for the future or which can be construed as a forward-looking statement must be viewed in conjunction with the risks and uncertainties we face, which may cause the actual results to differ materially from those expected. A detailed statement and explanation of these risks is included but not limited to what we have outlined in our annual filing, and the company does not undertake to update these forward-looking statements publicly. The event will be archived and the transcript will be available on our website. Allow me now to walk you through the agenda for today. Vinod will share his thoughts with you at the outset, giving you a market perspective, his vision of the company while touching upon the progress that we have been making. Vinod will be followed by James, who will present updates on global sales, market opportunity for Tata Communications and company's go-to-market strategy. There will be question-and-answer session after the management presentation, where you will get to present your queries to the management speakers.For the benefit of everyone in the room, as well as those joining via webcast, I request everyone to kindly state your name and the name of your institution before posing the question during the Q&A session. There will be an opportunity for the webcast participants to ask questions as well. We intend to take some of these questions, which are not already covered by the in-room audience towards the end of the event. And if we cannot take your questions, we will definitely come back at this point to you over the year. After the Q&A, we request your company over dinner. Arrangements for dinner have been made in the lobby outside the room.With that, I would like -- I would now like to invite Vinod to come over and share his views. Over to you, Vinod.
Thank you, Vipul, and good evening, everyone. Thank you very much for joining us today. I have a presentation I'd like to share with you on the results as well as the strategy. But before that, we have a special guest today who's joining us -- who's joined us, I should say. Mr. Saurabh Agrawal is the Group CFO of Tata Sons, and we have him in our midst. He'll be here for about 20 to 30 minutes. And the principal reason why I invited Saurabh to join us today is to answer some of the questions many of you have asked me repeatedly on the strategic interest of the Tata Group and telecom and how the group used Tata Communications. I thought it will be best that you hear it directly from Saurabh. And we'll have a few minutes of Q&A with Saurabh as well, after which he will have to leave. He's taken time out of his busy schedule to be with us. So I'd like to invite Saurabh up to just say a few words, after which we'll take some questions. But the questions on the results and so on can follow at the end. Thank you.
Thank you, Vinod. I'm here on behalf of Tata Sons. So Vinod invited me to share some perspective and answer any questions that people may have with respect to our overall telecom strategy.I think as many of you are aware, we did announce a transition sometime in September last year, whereby we decided that our consumer business would get transferred to Bharti. And when the portfolio -- I think when we looked at the overall different components of the businesses that we had, I think we very quickly came to the conclusion that that's a business which was not sustainable in the hands of Tata Group, and I think that business could do well in the hands of somebody like Bharti as far as different stakeholders and their business is concerned. And I think many of you are aware of why I'm making the statement within the context of what the telecom industry is going through. And I think from that perspective, it was very clear to us that if you want to remain in their business, we have to look at a significant investment of capital. And where that asset was, we decided that basically there's something where probably somebody else can add a lot more value. But when we looked at the different components of the businesses, I think one business has striked us very well in the overall portfolio. So when I look at the telecom portfolio that we had as a group, we had TTSL. We had TTML. We had Tata Sky, and we had Tata Communications. These were the different businesses that exist in the portfolio of the group. Other than that, I think we had some listed businesses like Tata Communication and TTML and we had some unlisted businesses.And very quickly, when we looked at our overall presence within the telecom market, I think we were -- we are the largest provider as far as DTH is concerned in terms of quality and service. We had a fundamentally great play in the enterprise space through both Tata Communications and the part of business which was sitting within TTSL and TTML. We had basically the rest of the consumer mobile business, which was sitting within the -- within TTSL and TTML. So amongst the different components, and obviously, Tata Communication, apart from enterprise, is a much bigger global connectivity play and many of the value-added services areas, as you all are aware of. But I think with the context, I think we were very clear when we alluded the strategy that we have a good position as far as DTH is concerned and as far as enterprise business is concerned. And Tata Communication, again, basically is a significant market leader in whatever it does. And we felt that basically enterprise businesses, we have a significant market share. And if we -- if basically, we were to combine these assets, it makes a lot of sense. So I think when we announced overall transition in the context of Bharti, we said basically we're exiting the consumer mobile business. We'll be combining our enterprise business and offered it to Tata Communication. It's up to Tata Communications and the shareholders to decide whether they like the business or they do not like it. It is something which pretty much originated from Tata Communication in the first place. And I think as a combined business, it's a significant business with a significant market share, which has been growing and it has been a market leader. And in the whole digitization and formalization of the Indian economy that we are seeing, it's not just about pure consumer mobile businesses. So our own view is that the enterprise business is going to be a significant business of the future. And I think there are significant synergies that can exist if these businesses were to come together. And overall as a group, we would like to have a presence in the enterprise segment overall. We like what we have in Tata Communications. We believe we can grow it significantly, and we will support the growth plans which the company and the management brings back to shareholders. So we are committed to that. And from our perspective, I think it's up to the shareholders and the board to decide whether they would like to take this offer of enterprise business to make it a significant business overall for Tata Communication. So from a group perspective, we are pretty much committed to the overall story as far as enterprise is concerned. So we have no doubt that this is a business where we will invest -- continue to invest going forward. And this is where we think there could be a lot of value-added services which can be overlaid on top of pure connectivity solutions, which are currently provided. So that is something which I wanted to give you a little bit of flavor on, and I'm very happy to answer any questions that people may have in terms of -- this has nothing to do with -- I don't think we are presenting any transaction, we are making any the announcement. It's just a statement of facts in terms of giving our perspective on how Tata sense we are looking at this overall portfolio that we have and just to basically share that with you. Yes?
Okay. I will answer the question on TTSL maybe after I finish my presentation, both in terms of the strategy and industrial logic of it as well as where the process stands as of now, okay? Okay. So today, I plan to cover a couple of things in my presentation. One is to provide an overview of our strategy. The second is to -- actually, 3 things, I should say. The second is to provide an overview of the numbers, the results for Q4 and full year, which we published last night. So I'm just going to cover that at a high level. And the third will be to give a forward-looking view of our aspiration for what this business will look like in FY '21. One of the things that many of you have asked for is for the management to share what are the contours of the business in terms of revenue composition, EBITDA profile and so on from a longer-term perspective and we'll be doing that in this presentation. I'll be followed by James, and James will provide an overview of our customer activity and our go-to-market strategy, and then we'll take Q&A. Pratibha will be joining us for the Q&A. Okay. So one of the things that we've been talking about or I've been talking about several times is the shift from being a telecommunications company to being a digital infrastructure provider. And many have asked what does that actually mean. So being a digital infrastructure provider at its core does have what we used to do before, which is the connectivity business and collaboration business. That is a foundation that will remain where we stay grounded. But around that, we believe we have created both the product portfolio as well as the market permission and customer access to provide other services that are complementary in nature that are crucial for where customers are going with their digital journeys. And what does this mean? This means we added the cloud piece a few years ago. That was the compute and storage. So beyond the connectivity and the collaboration, we first added the cloud services piece. The next piece we added was the security services, and the security services, as you realize, both for companies, large and small, whether they're India or global, it is really a major concern and it is something that every single company that we have conversations with on the network side asks us for. So the whole portfolio of security services to secure their network perimeter, but also to keep all the data that they have is a pressing need with every single customer that we engage with. The most recent additions to our portfolio have been in the space of mobility and IoT. In the last 1 year, we've started talking more and more about these services, and we have fairly disruptive plays in the mobility space where, without any investment in asset and infrastructure, today, we offer global mobility solutions both for humans and for machines and things, using a software play that sits on the spectrum and licenses and physical assets of mobile operators around the world. So it's the kind of thing that others have done to us in our traditional business. We are now doing it to mobile operators. Our eye on the prize is both on the humans. But far more importantly, it's not the voice and data roaming. We see the opportunity for connecting things and machines globally as they move across borders to be significant. I believe in one of the earlier presentations, we had Anthony Bartolo present this. And when we -- when I share the operating metrics later on, I will talk about these services in slightly more detail. We also have an IoT play in India, which is a full stack play where we offer turnkey solutions that includes everything from the sensor, all the way to the application software with the network piece in between, which again is gaining significant momentum. So with these services, we really are now able to have conversations with customers that has moved us away from being viewed by the market as a telco, right? While connectivity is at the core, the conversations that our sales team can now have with customers is truly about anything they need for their digital transformation journey. The other important thing that this shift has enabled us to do is, previously, our discussion, our solutions to customers were really B2B solutions. Today, we are being included in their product strategy, in their go-to-market strategy and so on. So the nature of the business is really become B2B2B or B2B2C. So when we're dealing with an IoT company for -- with an IoT solution for an automobile company, we are actually part of the design of the car that will be used by the consumer in a way. And therefore, the proximity or intimacy that we have with customers significantly increases. And what does that mean? It just means that the relationships become stickier and we cannot be easily replaced once we're inside. So their shift from pure B2B to B2B2X is an important shift that our digital infrastructure strategy enables. I'm going to move this very carefully and see what this is on. Okay. From a services road map, again, I don't want to get too much into the technology itself. But when we look at our CapEx spend and how we do things, I feel it's important for you to understand a few things on the shift of the business. The first is no longer are we thinking build more submarine cables, build more physical infrastructure. The theme for us for the last few years is to shift towards making the Internet fit for business. We are the fourth largest Internet backbone provider in the world. We carry 11% of the world's Internet traffic, and therefore, we are able to do things with the combination of our subsea infrastructure, that is still the world's largest submarine cable network, with the amount of traffic we carry on the public Internet to carry Internet traffic for our business customers in a relatively more secure way and a relatively more deterministic way. That's the meaning of making the Internet fit for business. And we are seeing customers of all shapes and sizes beginning to get comfortable with using the Internet not only for their consumer use but also for business use. And so we have a lot of solutions built around this fundamental premise. What does that do? What that enables us is to build public-private hybrid solutions. So in other words, let's take cloud, right? I will use different services to use examples. We are able to now build solutions for our customers where they partly may be keeping their workload on AWS or Azure, but part of it they want in-house and want it in a more secure environment. They will come to Tata Comm for us to manage this in a seamless -- on a seamless basis so they can move their workloads depending on sensitivity of application either on the public cloud or something that we manage on their behalf. That is a good example of what public-private hybrid allows. And this, again, is an important design philosophy that cuts across all our services, whether it be network or cloud or unified communications or security. The third aspect of our services strategy is to build application awareness into all our services. We have many activities going on where we're designing our services in our network so that you don't need a heavy IT organization in between. So the services that we are taking to market will sense based on the customer's application environment, what our service needs to be, right? This is a bit of a visionary statement that I've made, but we are taking steady steps towards it to build more application awareness into everything that we do. Then the next part is how services are consumed by our customers, right? Again, customers are shrinking their IT departments and they want automatic provisioning. So if it's Diwali season and your traffic volume goes up in your retail stores, you should be able to consume more bandwidth automatically without anything coming in between. And the layer that does this is the API layer, right? And we are building APIs into all our services that again enables easier consumption of our services. So I don't want to get into the technology of it, but think of this as, this an application awareness, allows easier and more dynamic consumption of our services. What it also means is that our selling effort can decrease by that extent. Our operations support can decrease by that extent. So we don't need people working with the customer saying, we take your order now. We'll go put it into a system and process it. The applications -- their customer's application is talking to our network with no human touch and will get provision. Again, we don't do this -- we can't do this for every single service for every single customer today. But steadily, we are chipping away at this and we'll create this kind of service experience. These are some of the reasons why, when I talk about margin expansion later, we believe that we will be able to control some of our expenses. It requires some upfront capability building right now, which we're investing in. But in the long run, we believe it will pay off fairly significantly. And the last one is about creating a customer experience where customers can auto-provision, look deep into the network without again dealing with a lot of layers of management or people on our site. Again, it's beneficial both from a customer experience standpoint but also beneficial from a cost perspective. James is going to talk about our thinking and what we are intensely working on as far as customers are concerned. I'd just highlight 2 things here. One is about what James calls deeper with fewer strategy. When we -- when you see the numbers of the products we're able to sell into customers, you will see and we've also gained a lot of confidence in the last, say, 18 months that we have very relevant customers with the digital infrastructure service suite and customers are willing to buy more services from us. So rather than try to go and acquire more customers in the large enterprise space, we are focusing our activities and doubling down our resources into the accounts that we already serve. And our goal is to increase the number of products or product penetration ratio with the customers that we have, right, but at the same time create a digital strategy, a digital outreach strategy to add new logos within the customer segment that -- which is our target profile. So these are the 2 big programs that James is driving. And if you give him a chance, he'll spend 3 hours only talking about that, but his whole presentation is only 10 minutes today. And the third aspect will -- I think you will start seeing it play out in a very big way in our numbers probably from next year onwards, but we have actually been laying the foundation for this from nearly 2 years ago, right? But basically, what we're doing is embedding telecommunication services like SIP trunking, like our MOVE IoT service, some of our SDWAN capability, our application-aware networking into the platforms of large SAS providers, large IoT platforms and so on, large collaboration platforms. These are strategic relationships that take a lot of time to win. They only choose a couple of players for global deployment. But once you're in, you're able to actually grow with them as these large players get more successful. And this is something, as I said, if you ask us to peel out the number and show it to you today, it's probably not significant. But personally, this is a Trojan horse that I'm very excited about because we have interesting force multiplier conversations going on that will pay off dividends for us in the future without significant incremental effort. That's on the external side. Internally, I can tell you that the last 12 months for us have been quite harrowing in many ways because we've had to make significant organizational changes, which we believe are necessary to both address our cost structure, but also, more importantly, to make us agile to respond to the market. Once such organization changes, what James is now leading, he came into the organization about 18 months ago with the responsibility of sales, but we significantly expanded the responsibility to include sales and marketing, service delivery and service management. So in other words, everything to do with customer success, it lies in the hands of James Parker. Also makes it easier for me because I have one neck to choke. So that -- but that's a fairly important change that we made last year. We've also discussed with you quite a lot during the last 3 analysts calls on the investment we're making in the digital transformation. We have taken our time, to be honest, to figure out the right strategy for our digital transformation. Although we had monies in our budgets, we've been very careful not to rush to spend them till we're very clear about 2 things. One is to know what is the experience we want to create for our customers and only then digitize it, not just to rush into something and then have to rip it apart and redo it. The second is on the in-sourcing versus outsourcing strategy, whether we're going to use off-the-shelf systems or OpenSource, so on and so forth. So I feel very comfortable and happy actually that we took more time than we initially planned, both because we didn't spend all the money required. But I feel that the road map that we have is a more robust one. And when we roll it out, our customers will feel immediate impact and we will start seeing the savings progressively in our P&L as well. So a lot of work has gone into this. It is also part of the reason why I feel confident giving a forward-looking view of where we think the business will go. And finally, we've done some cleanup on how we measure various functions within the organizations and align the whole company in this year's bonus calculation, if I want to call it that, towards a balanced scorecard that doesn't create any cross-functional conflicts or misunderstanding. Everybody is marching to the same tune. One of the things where we have been investing is investing into the future, and some of you have said, "Do you need to do it? Don't you have enough in our portfolio -- in the portfolio and so on?" But the opportunity that we see around security, around IoT internationally, IoT India and on the application-aware networking has been quite -- one is an adjacent opportunity where we have the right to play. But more importantly, I'll say that the feedback that we've got from customers has been overwhelming, that we have aggressively invested and we believe that it's been the right thing to do for the shareholders' interest from a medium- to longer-term perspective. I'm not saying wait 10 years and the return will come. We believe that the returns will be evident in the next 3 years to 5 years. So -- and we've shared this last quarter, and if you look at the results of the operating metrics, across MOVE, across IoT India, security and NetFoundry, in every one of these, these are not dreams of products. These are real products out there being used by real customers. We have proof of concepts that are increasing, trials which are increasing every single week, to be honest, and number of customers increasing. That -- all of them, I can't pick a favorite child out of these, but I feel that the ones that will move the needle visibly during the course of this year will be MOVE and security. And where we have significant momentum, we have large wins. Many of them have -- many of our customers have come out and made press releases, which you may have seen. And we have many others that are not yet ready to talk, but the volumes are building quite nicely and to the extent that we will continue to invest in incubating these services during the course of this year and I'll give you an indication of how big they will be in the coming years later on. External validations continue to pour in. Gartner has positioned us for the fifth year in a row as a leader in network services globally. This is quite important for us because our large customers invite us to RFPs when we are positioned there as a leader and we are the only carrier outside, 4 guys have been there for 3 decades or something like that, to break in and hold the space. And it doesn't come easy, and staying there every year is a challenge but we have been successful for 5 years. We're also very pleased that we've been positioned for Asia Pacific as a leader by Gartner in their cloud and hosting services, right? This again is a first for any company from this part of the world and we're very proud. And this validation gives us confidence that the growth that we had last year in our hosting services, we will be able to replicate in the coming year as well. There are many others, and I won't go through it, but we continue to get recognized by industry analysts for what we have managed to pull off. Aon, in fact, now I can give the updated news, just last night announced that Tata Communications is 1 of the top 5 -- top 25 employers in India, which is very important because we need to attract and keep the best talent. So that accolade for us is something that we are very proud of and we've got similar recognitions in a couple of Asian markets as well. The next validation is from customers, right? Over the course of last year, James and his team added close to 500 new customers. That's one validation that they're still able to get new logos with our proposition, and we have close to 6,000 customers right now. And the product penetration ratio for our top 300 customers increased to 5.38. So we're able to sell more services into the customers that we have. So we're able to add new logos and we're able to sell more, which again is probably the most important validation, even more important than what the industry analysts say. The year gone by in numbers. I'll talk about what has worked well and what -- and challenges that we faced. Our data revenues grew by 4.4% on the back of the strong growth in our growth services category. Growth services experienced double the growth that we had in the previous year. We grew by about 18% in FY '17 over FY '16. And we grew by 35.6% and that's a phenomenal growth by any service -- by any standard. IZO grew by more than 300% and our security services grew by 64%. At the same time, our traditional services grew 4% year-on-year on a full year basis, and this is in spite significant industry headwinds that we faced. The services within that, that I'd like to call out, which are showing momentum that we think we'll be able to carry into this year, our ILL and Ethernet services that grew north of 10%, and our VPN services also grew by 10% year-on-year. The funnel is good for these services. The credibility that we have in the market is good. Obviously, in the traditional data services, international IP Transit had some pressure. IPL services had price compression so the growth was muted. And our traditional mobility services, again, is good for EBITDA. But revenue-wise, the growth was on a decline. The traditional services, since we're talking about it, Q4, you've seen the numbers. But for the whole year, we had 30% EBITDA margins, which was strong. It is close to what we had called. Q4 was 31%, if I recall. And the CapEx for the full year, while we had guided $250 million to $275 million, I've committed to you that we will only spend if it was absolutely necessary but that we would spend if opportunity was there. Our teams did a good job of managing our CapEx tightly and we spent $235 million on CapEx during the course of last year. Cash flow is maintained despite investments we had to make in growth and innovation services, and net debt was contained at $1.15 billion. TCTS started picking up. The revenue grew by 10% in spite of some slowdown we saw in the India domestic market, but we have won more new logos and we've also won work which is of a higher margin profile. So TCTS has entered this year with some fairly good momentum based on the wins they had last year and a strong funnel. The year had challenges, I can tell you that. On one hand, we were seeing significant growth in our growth services and good pickup in the various incubation, but our traditional services was affected significantly by operator consolidation in India. We've had exits in the market of operators and this had an impact, both in terms of revenue but also in terms of some of our operational delivery with SLR Comm and TTSL in a form -- in some form or the other, exiting the market and a few other small ones, too. We lost both revenue and also we had some challenges on the last mile dependency that we had on these providers. Now this is -- can be viewed as a double-edged sword. It also means little bit less competition on one hand. So maybe in the longer run, it can have some benefits, but we definitely felt the pain of it in our numbers, especially in the second half of last year. Consolidated revenues and EBITDA declined primarily on lower voice volumes and also price compression in voice and the investment that we made into our future as far as growth services and innovation services are concerned. Now growth services, I will be honest with you that I call that we will be EBITDA-neutral by March, and I do have it go in my face as far as growth service is concerned. And it was simply because it's not that the growth that we expected then delivered. We had a combination of 2 things. One is the mix of services cannot always be predicted in the portfolio of services. So the mix impacted gross margins to a certain extent, but that, I believe, will correct itself. And the other is the upfront investment we had to make in Q4 with the cost to win some of the new businesses impacted our margins that led us not to be able to deliver the promise that I personally made on delivering EBITDA-neutral as far as growth services are concerned in March. However, the fundamental belief that we have, and I personally have in the suitability of our growth services for the customers that we serve and the margin profile that we can achieve, remained steadfast. In Q4, we also had some customer insolvency that -- hits that we had to take in our media and entertainment business that we believe was abnormal and will not be something that will impact us going forward. We will bounce back from it eventually. TCPSL during the course of the year was impacted, as you know, by limited cash supply. But in the last few months of the year, TCPSL actually turned around and it has reached an EBITDA-neutral state. The number of transactions reached 98 in the month of March compared to in the early parts of the year. It had gone to less than 20. Pre-demonetization, it was about 71. We took a deep dive. Cash availability to us is now about INR 60 crores per day. So there's been some increase in that, and transaction count is also up. And so we've managed to contain the costs, redeploy ATMs and stabilize that business. So I'm actually very pleased with what that leadership team did to deal with the adversity post demonetization. ROCE declined principally on account of the increase that we had in depreciation. Coming to FY '18 full year numbers on a consolidated basis, we published this, so I won't go through it in too much detail beyond the numbers shown here. But revenue, due to the impact of voice, prices and volume coming down, had a dip of 5.5% year-on-year at INR 16,651 crores. Of that, data had a 4.4% increase, coming in at INR 11,339 crores. And voice had a decline -- a fairly significant decline of 21%, coming in at INR 5,311 crores. EBITDA for the consolidated business was INR 2,291 crores, 2.91% -- 2.9% decline year-on-year, largely, as I explained, due to the impact of voice. We also had an impact, over INR 39 crores, negative impact due to the foreign exchange movement. EBITDA for data was INR 1,956 crores. It was muted due to the investment we made into growth and innovation services like I've explained. Voice EBITDA was nearly 20% down, coming in at INR 336 crores. Looking at the portfolios of traditional and growth. Traditional, this is data. As you know, traditional revenues grew by 3.9%, coming in at $1.2 billion. Here, I'm using dollars. And the growth services grew by 35.6%, coming in at close to $350 million. EBITDA for the -- was $355 million and $42.8 million negative on the growth services. Those are the numbers for traditional and growth. Q4 performance, INR 4,009 crores for our consolidated revenue. They were down 6.6% year-on-year and down 2.6% quarter-on-quarter. The reasons are more or less the same. On data, revenue grew 4% year-on-year, 0.4% quarter-on-quarter, coming in at INR 2,895 crores. And this was really on the back of strong pickup in terms of our growth services. Voice, the story continued of a decline, coming in at INR 1,113 crores. Consolidated EBITDA was INR 555.5 crores. I think we liked all 5s. That's why we included the decimal there for the quarter. And EBITDA for data was INR 485 crores. And voice was INR 71.3 crores, which was in line with the volume and revenue decline. Q4, taking a portfolio view. Traditional services revenue was $297 million. Growth services was $97 million. EBITDA was $90.2 million, which is a 26.7% improvement year-on-year, and on a quarter-to-quarter basis, a 5.5% decline. And on EBITDA, we were negative $13.7 million as far as our growth services is concerned. And as I explained, we had some one-off insolvency as well as upfront investment. The upfront investment will correct itself over time because these are 3- to 5-year contracts and it's been baked into the structure of the -- commercial structure of the pricing. Q4 portfolio, as far as TCTS is concerned, up 7.2%, coming in at INR 296 crores. TCPSL was around number of INR 100 crores. Quarter-on-quarter, as I said, there was a good improvement of close to 10% year-on-year, though it was down because we've been getting out of our -- or trying to limit our third-party business and focusing more on our white-label business. EBITDA for TCTS, good improvement both on a year-to-year basis and quarter-to-quarter basis, coming at INR 48.6 crores. And TCPSL, as I said, just on EBITDA-neutral at INR 0.3 crores and we believe that there'll be further improvement in that. When we were looking at all of this -- and before I said I wanted to use this slide that I'm going to show next. To set the context, we talk about transformation and change all the time with you. And it's not that we don't look in the mirror and ask ourselves, do we have the ability to transform ourselves? And one of the slides that we shared actually with our group Chairman that beautifully summarizes that Tata Communications has an inherent DNA for change is the following. So we took a snapshot of our business, looking at 2014, and then the business in 2018. And a very powerful story emerges from this, right? So I'll just walk you through it, if you'll bear with me, so the analogy of our net revenue and gross revenue, okay? So the story basically, you can ignore the commentary on the right. I'll give you the -- give that to you live. In 2014, our voice of business net revenue was $267 million, right? 2018, the same voice business is $109 million. So clearly, a business in decline. We went through a period when we saw this writing on the wall saying we need to invest in data. So we started investing in advance of this in data. So during that period, data grew from $880 million to $1.138 billion. So we actually offset the decline in voice net revenue by adding $257 million in net revenue on the data side, right?Equally, at the time, we were realizing that just depending on wholesale data is not going to be sufficient. We need to invest into the trend and create enterprise revenues. So we started building the enterprise sales organization, putting more money into it, into marketing products, so on and so forth. Carrier data during this period, this now I'm shifting to gross revenue, actually remained relatively flat. $577 million, $598 million last year, grew by $21 million, right? But the enterprise business during that period added $427 million. So we actually successfully shifted from what used to be a purely wholesale business to a business that has both wholesale as well as enterprise. So we created a new revenue stream from voice to data, but we also created a new customer segment from service provider to enterprise. Within that, we said we have our traditional portfolio of services that grew $213 million from $988 million to $1.2 billion. And the growth services grew from $110 million to $346 million, equally adding $236 million. This also shows that we saw that selling downpipes is not the future. We have to move into managed services and higher-value services. So we built into that trend that we saw, right, and that's proven in the numbers. So I can show you the slide and say with great confidence that we have the capability to do 2 things. One is to look at where the market is going in terms of technology or trend, right, and to build into it. And the second is to deliver the numbers. We may be off by a quarter. We may be off in a year. But these numbers, hopefully, are very evident, that the capability to change the DNA of who we are is inherent in the organization. During this period, net debt also declined from $1.8 billion to $1.15 billion. Now obviously, with the TTSL transaction, that will change, but we are confident as a leadership team that changing the profile of the business, and this is really changing the wheels of the car while it's still moving, right, and you can't predict exactly how it will go but we do get to our destination, right? And hence, this drives a lot of the confidence we have in what we've invested and the changes that we've made this year, but it is also what gives me the confidence to stand up and share the next few slides with you. This is to give a forward-looking view as to what we -- people have routinely asked in many analyst calls, "Vinod, share with us, what will the future business look like?" So we can look both at the quarter-to-quarter movement, but we can also see how do you think the mix of the business will change over a period of time. So these are our aspirations. These are the plans that we are working towards. From a revenue mix standpoint, right, and we just showed traditional growth subsidiaries and voice as the 4 categories, we believe that the voice business will decline. That's where you're going to see the most dramatic shift in terms of revenue contribution, shifting from 32% to 20% voice.The next piece will be data -- traditional data business, which will still be extremely important to us. But from what was 46% in FY '18, that will decline to about 38% contribution to the overall revenue pie. The big change here, obviously, is the growth services. These are services that we already have. We don't have to build anything new. These are services that are in the market being sold, gaining momentum. We expect we'll grow about 2.5x from 13% contribution today to revenues to close to 32% contribution. And the subsidiaries, this is largely TCTS, TCPSL, we're keeping it at relatively flat. If anything happens there, it's upside. But the subs will grow from 8% to 10% contribution. EBITDA contribution correspondingly, subs, which are 7% today, will increase to 9% of the EBITDA contribution. Again, principally, what's baked into this is TCTS. Growth services that are negative 22%, which is a drain right now, a growth in incubation will turn around and make contributing about 1/4 of our EBITDA and that will -- and traditional services will decline from its -- it's 100%. If we take it, obviously, there's a negative there. 100% will decline to 60%, and voice will be only 6% of our EBITDA. 94% of our future will come from our data services, right?Now one of the questions then is corresponding margin, how did the margin profile change? We expect that we have the striking possibility, I don't know what words to use here, of expanding our margin from 17% to a range of 23% to 25% by FY '21. Question then is, how do we get there? It gets there through a combination of 2 things: through revenue productivity and cost productivity. I'll take you through each of those. We believe that our traditional services will expand with the CAGR for revenue growth to be about 5%. Our growth services will maintain a CAGR of 35% year-on-year. And our innovation services, we're not using a percentage here because the numbers are extremely small now, will contribute about $150 million of revenue by FY '21, right, in innovation or incubation. Those are the 4 services that I called out there. What that leads in turn is a 1% expansion in data margin from our traditional services. Growth services will add to about a 1.1% expansion in aggregate data margin, and our incubation services will contribute 4.5% expansion in our data margin. So -- and then flipping over to the cost side. Manpower cost, if we take the last 3 years, have been increasing by about 8% CAGR. We have already started taking measures to control that. And we also believe that we'll start seeing operating leverage there. Manpower cost will increase, but only by about 5% is the device CAGR that we're projecting. That will contribute about 0.5% expansion in data margin. Network cost, as we change the mix of business, that we're increasing about 9% year-on-year for the last 3 years, will decrease to about a 6% increase on a year-to-year basis for the next 3 years and that will lead to about a 0.2% expansion in data margin.G&A, we know we've kept it relatively flat, in that we believe that we will continue to keep it flat for the next 3 years also and that will actually translate to about a 10% productivity gain as cost ratio to revenue will actually improve 10% year-on-year and that will lead to about a 0.6% expansion in data margin. Aggregate, we believe that this will add about 8% and there will be some that do better, some that do -- won't hit exactly these numbers. But based on this, we are aspiring for a 23% to 25% margin on our data services by FY '21.This just gives another view of it. So it's data margin of 17.2%, 5% to 6% coming from revenue productivity, and this is from Mr. Parker, who will be driving more sales into existing customers. No pressure, James. And it's the low end of the expectation as far as I'm concerned. And 1% to 2% expansion from the manpower and OpEx, leading to the 23% to 25% aspiration that we have. Key things that I want -- won't go through every single factoid on this slide here, but we see our addressable market significantly expanding because of the services that we've already created. James also has a slide later on that he will be showing on addressable market. The numbers are different only because this includes all our services and what he's showing is just network cloud and collaboration. It doesn't include IoT and mobility. But today, we're targeting a $50 billion market. Our market is expanding to $50 billion by FY '21. We expect that our IoT services and our MOVE services to both be $100 million products each by FY '21. That is the potential and it is because of this potential that we are investing what we are today and we're seeing the momentum that we believe will get us there. Growth services contribution to the overall data services, like I said, will expand from 20% in FY '18 to 40% by FY '21, and the data business will contribute 94% of our EBITDA. Voice will only be 6%. And there's other data points here, which you can take a look at when we permanently put these slides up. To summarize, the acceleration we believe that we've seen in growth and innovation services, we believe, will continue. Momentum in our traditional services due to services like IPL -- not IPL 2, ILL, VPN and Ethernet leads us to believe that what we've shown can be maintained. The bundling of services and driving up product penetration continues to be, and will be, a major area of focus for us in the next year and the next 3 years. CapEx to revenue ratio, we will sweat our underlying cable assets. We will invest where required into our network, especially the build-out last mile, but we are very focused to try and build out an asset-light business model and we're taking many steps to improve our supply chain efficiency. The focus on costs remains. We will -- we've had to invest in creating skills for our growth services. We will have to do that going forward as well. But we believe that due to our digital efforts and our transformation of business processes, we'll be able to shift resources from our traditional or BAU business into the new areas and keep the CapEx -- sorry, manpower envelope relatively flat, and that will start shining through as far as operating leverage in our growth services is concerned. So with that, I will wrap up my presentation. Maybe the only thing I will add since the question came up is on TTSL. I've -- where the -- I've explained the industry logic before so I won't redo it. Where the process stands is final reviews by the board which, obviously, involves the government approval as well that runs, more or less, in parallel. And we're expecting in the coming weeks, we should be able to get to a stage where we can make the final decision with the final number. And as you said -- as you heard from Saurabh, from the group perspective, the support is there. They would like to see it happen, but they can't put the gun on our heads. Together, the shareholders would have to approve it, and they're only -- they're waiting to hear from us with our offer and we're working through with the government on it. Okay? That's it. I'd like to invite James at this point.
Thank you, Vinod. There's a couple of things that I'd like to walk through everyone today on, one, is to take a look at our market opportunity, where we're focused, and certainly, where we're going to drive and where we anticipate our growth to come from. And then, how are we structuring the go to market to really go after and accelerate that growth opportunity? And secondarily, and then maybe most importantly, do that in a cost-effective way and ensuring that our cost structures are aligned well to that opportunity. So the first point of view is to take a look at -- I will say this, the macro play is -- they're happening in the market. And certainly, for the customers and the segment that we're focused on, 2 key elements that play really, really well into our strengths. Our customers are either driving to expand globally. They want to drive growth outside of their home market in one form or another or they're looking to use services or expand their capability of getting services from other markets to deliver in their home market. And a core strength of our offering our services is to execute cross-border. And so when we look at our clients outside of the domestic market, they are trying to get into multiple markets and capitalize on their growth potential in more than one -- let's say, more than one country. And so our typical target customer, they may only have 40% of their estate in their home market and they need to get and operate into 5 or more countries or 5 or more markets. And our global network and our foundation gives us that strength and the right to play and the right to win across multiple countries and such. We're not competing in that domestic market, in that international space. The second point is the India market is incredibly important for us. And the strength and the execution that we have in the Indian market, it certainly plays for us to drive our global capability in a global market. This is a destination where customers are coming to and they want to grow and they want to take advantage of the opportunities in the marketplace in India. And we're extremely well positioned to help our clients get here and help our customers that are Indian based and also go global. And so the trend plays out across the growth vectors that we see for the business in which we have to drive and maintain share in India and we have to then be able to monetize on a global opportunity. So if we first take a look at India, we talked about the market potential. This is really just laying out where we see the addressable market. There's avenues that this is bigger as we increase the product portfolio. But you can see clearly we have a market share position in India and we have to maintain that and we have to grow that and that becomes a strength for us to drive international expansion and certainly performance for us. The other thing that you notice is on the market is the customer distribution. You can see the 23% international, 77% is India, and I'll show you a little bit of the mix when we look at the average deal size for these customers and why it's important that we need to actually drive both. And so our traditional and core market is strong, but when you look at the investment opportunities in the build-out of our growth services, we're expanding that aperture of that domestic market, and IoT and MOVE are great examples of how we're increasing that market opportunity for us. And this will become self-evident when I show another slide on the product penetration that off of that base set of customers, how can we drive that product penetration rate up in India and do it then also in a cost-effective way and how we deploy our resources?And so the other market, we have a great opportunity in India. Our growth services, that position us for strength internationally. And internationally, when we look at our potential, this is a $27 billion, $28 billion market opportunity for us. And underpinning this is the widening of and the investment in growth services that enables us to have a broader play internationally. And these growth services play on 2 fronts. There's a defensive play because it defends our base and it creates new opportunity and stickiness into our existing base, but it's also an attack play. And so when you look at our international business, this is a lot of acquisition of new customers and it's the growth services that are really driving that acquisition. And so we have a host of customers that we won this year not based on solely the traditional set of services. Clearly based on our global footprint and our global network as a core, but absolutely based on our core services and our ability to do hybrid WAN, to have security, to have unified communications. And certainly, the forward-looking positions that we have on MOVE and IoT gives those customers a lot of confidence and strength that they're coming to a provider that's going to facilitate a host of needs for them over many years to come. And so that gives us a lot of opportunity to drive that growth. The other piece that you see is just anecdotally on the bottom left, that we are driving a higher average value per customer internationally, and that delivery resource outside of that initial sale is all cost based in India. And so as we drive and get that premium performance internationally and our cost base and structures are lower in the India market, but also gives us a competitive advantage certainly when we think about pricing, and certainly, as we think about our profit performance as we go forward. The other dynamic that we see is just a rapid change of the demand that's coming from our customers. And so we went back and looked at our RFP analysis, our funnel analysis and what are the types of deals that are flowing into our business, and you can really just focus on the right side of the slide and looking at the funnel analysis from '17 to '18 and the pronounced shift in interest from our customers. And this interest is being grounded in our growth services. And so increase on hybrid and SDWAN solutions, over 500% in the funnel. When I say funnel count, that's the number of opportunities that we have coming into the funnel. And so we'll have in the range of 5,000 funnelized per month. And of that, that percentage that we see growing, about 50% of those -- of the volume of that's coming in is coming more and more from our growth services. Similarly, we look at our security funnel adds, 63% up, 300% up in bids asking for managed security solutions in India, 142% increase in our UC or unified communication funnel value as well. And so that demand is coming. And the gearing of the machinery and the resources really and the scaling that we have and the investments that we made, one is generating this demand and the market's responding to it and now 2 are opportunities to execute against it in a really compelling way that we monetize it efficiently and effectively. We clearly have the foundational investments that we've put out there that enable us to identify the opportunity and certainly then go execute against it. And so the clarity is that we have the opportunity and that we're attracting it and we're going after it, I think, in a highly effective way. And when you look at this chart, and Vinod alluded to this before, of maximizing our product penetration rate. And so that top red line, as we look at a client that is the most penetrated that we have, they have 13 products to date. And you can see then the cascade, the top 20, and how we've progressed that from '18 -- or sorry, from '17 to '18, all the way through, and then our top 300 customers and our product penetration. If I would just look at our top 300 customers and we get our next product to be penetrated at scale across those customers, this is $150 million and $200 million opportunity. And so when we look at that and to be able to do that, you have to have a differentiated level of focus. And so the cost structure of the resource pools that we put to our top customers that are driving 90% of our revenue and we have 7,000 customers, and so then how do we think about the 1,000 customers where we can drive high touch and execution? And then how do we think about the 6,000 customers that have a very cost-effective, efficient engine that can monetize that effectively? And so what we've done, and looking at our sales force, is we did take the top 1,000 clients and we put that into what we call a high-touch organization. And so this is where you have the account manager. We have solution engineers. We have product specialists. And the focus and the goal is to drive that product penetration rate up via growth services. That's the mission. And so when we think about all those base accounts and how we're going to mitigate the churn that we have in the business, it's via the growth service. And success for us is seeing every one of those top 300, frankly, the top 1,000 customers, growing. That's what drives customer success, is the improvement that we grow every one of those customers every year, and that's the mission that we're on. What we've done is given the resourcing to do it and so we increased the specialists. We've increased the solution engineers. We've given less accounts per account manager so we can drive the depth and we can get that market -- or sorry, that product penetration. Now the other 6,000 clients, we have put up a digital channel, so a digital marketing channel, a digital sales channel. We have -- some of that is completely housed in India for some of our market segments. These are also deployed regionally in the U.S. and Europe as well to go after and monetize that business. And there's a clear pathway as we -- customers grow within the revenue footprint and product complexity, that they certainly will migrate up into a high-touch model, and this expands our full, I would say, delivery stack of resources. So when we look at how we market, how we sell and how we serve from a delivery side, this notion of that high touch follows through that suite of services of those resource pools that we have also in the company. The other core thing that we've done is look at how we message, position and target our portfolio into our customers, and the meta point here is how do we have a compelling conversation that drags 2, 3, 4 products within the same conversation. And so we really go to market around these 4 business themes that every one of our customers is having conversations about. They're trying to have a conversation about borderless growth, productivity efficiency, customer experience and managing business risk. And we have offerings that are compelling and differentiated in each one of those areas. And as we talk about those business themes, we get 2, 3, 4 product pull-through and this is how we can get efficiency in the selling motion, and certainly then drive that product penetration right up and not having to add incrementally more resources every time we need to go do that. And then lastly, we have this organization change in structure and bringing marketing sales, service operations and delivery together. The core of the success, and I think about Destination 21, is how are we going to drive the customer success factor way up? And certainly, the customer experience is part of that. And so we have aspirational goals around our NPS target, to become world class in that position. And this means we're systematically understanding every digital touch, every marketing touch, every sales touch, every service touch and understanding how do we optimize that for customer value and certainly then for performance value back to the firm. For us to drive the end-to-end execution, it requires this kind of change on our customer-facing organization, that we work seamlessly together to deliver increasing levels of value, but the synergies will come from the structure itself, that we can get performance and higher performance out of the same set of resources. And then lastly, just to summing it up in my quick time, and certainly I'll have time to take questions over dinner, but we're seeing the results in the early days of the improvement and the funnel is that driver. This is something that we review every month by product, growth services, traditional services. You can see our total funnel improving. But you also see substantial growth in our growth services funnel, 63% year-on-year. And now our focus is, how do we make sure that we monetize that opportunity? And what we do see is our conversion rates are holding. And so as we go forward, if our conversion rates hold, the velocity of these deals hold, the yield improves and we're starting to see that glide path that we're on. That's all I was going to cover. Thank you.
Thank you, James. May I please invite Vinod, James and Pratibha to the dais and we'll open the forum for Q&A?
This is Nimit from CWC. Two quick questions. One is that if this transaction were to go ahead and it may happen at market multiples, there's a very good possibility that the leverage on Tata Comm's balance sheet goes up significantly, and this happens just at the time that the company is in the middle of a big transformation. So given that, how do you, at the group level, think about that leverage? And secondly, this leverage can only be solved once the -- post land transaction when the government actually allows the equity to be infused. At that point in time, what is the group's thoughts on actually adding equity to the asset to help it delever?
Well, you are absolutely right. I don't think it's for the management team to come back and present what the contours of the transition are, and we're not discussing that. But all I can say at this stage is you're absolutely right. If it was to be funded purely through that, the leverage would go up. At the same time, there are constraints in terms of the overall shareholding where we have government as a particular -- as a shareholder of a certain percentage of the shareholding. Frankly, I do believe I think that what we offered to Tata Communications overall from a shareholder perspective, it creates a significant value. But there's a lot of synergies between what they already have and what TTC -- TTSL's enterprise business offers to the combined entity. In terms of leverage, I mean, frankly, I think as a group, we stay committed in terms of supporting this business in any form where if it needs the additional equity, we'll figure out ways and means of how that equity can be put in, how that can be taken care of. But at the end of the day, it's for the management team to give it -- present it to both the shareholders as well as all the shareholders and figure out what goes through. So from Tata's perspective, all I can say is that we are very happy to support the business in any form, whether it's with capital or with strategy or with any other means in terms of supporting the management team and any growth plans that they build out for the business.
Another quick question. If the government were to offer the 26% stake, how would -- how does the group think about that to the Tata's?
I think it's a very hypothetical question. I mean, we are getting into election year next year. I mean, frankly, there are too many variables at play, and I think it's for government to decide the process and the timing of such a decision. I think land demerger was an important milestone for them to make sure basically that what was promised to them at the time of the initial transaction actually accrues and that's something, which hopefully should close before the end of this year. We are well on par to do that. I think post that, basically, it's for DoT and the government to take a call on whether they would like to continue to be a shareholder or they would like to divest it and decide on the process of doing that. As and when the situation arise, I think we will take a call depending on the process which government would like to follow on whether -- where we go from there. So it's too early for me to comment on it. I think there are too many factors and too many variables to give you a straight answer.
This is [indiscernible] from [ Karmin ] Capital. Just a quick question on this. Where is this process of the fact that we've been hearing about this enterprise business of TTSL being offered to Tata Comm? Where is the process? I mean, where is it -- we understand that -- is the government in favor of this? Or what is the status of this?
I think I would like Vinod answer that question. Frankly, from Tata's perspective, we offered it to the company. So the company and its board to take a call and report back to us where -- as and when they would like to extend the offer. So from our perspective, we have -- the fact that we own their business, pretty much a large part of it, by taking overall the liabilities related to that business, I mean, from our side, we offered it to them because we think it makes sense. But it's for all shareholders and the board to decide as and when they make an offer. And that's when we will look at it, what the offer is and take a call on whether it works for us or not.
If there are no other questions, I'd like to thank Saurabh for joining us today and we'll carry on with the rest of our presentation. Thanks, Saurabh.
Thank you. Thanks, Vinod. All the best.
This is Rumit from IDFC. I had a question on the strategic rationale of Tata Tele Enterprise business. So the way I see it is today with $1 billion of capital employed and the guidance that you've kind of given, you'll be generating close to $0.5 billion of EBITDA. Now with Tata Tele Enterprise business, obviously, we don't know the valuation. But I assume that you'll be nearly doubling your capital employed with that acquisition. And if I look at the presentation that James gave, the growth, the untapped market and the growth in Indian segment is growing at about 7% CAGR, while your growth services internationally are growing at about 30%, 35% CAGR. So what is the rationale to double your capital employed in a market where your new service penetration is not as high? And wouldn't it be more efficient to sort of deploy capital in the areas where you are seeing 35% kind of growth?
Okay. So as I've said before, there are 3 aspects I'll highlight to the -- what we see as the industrial logic for the Tata Tele acquisition or the interest in their SMB business. One is the small enterprise SMB market, especially the M part of the market in India, is the fastest-growing part of the enterprise segment, right? And so we see that as a big opportunity to sell both network services that Tata Tele already has, but to cross-sell the rest of our products into that customer base. So we see significant revenue synergy as well. Many of our cloud services, security services, our Unified Comms services can be easily sold into that segment and to get more revenue per customer and to create stickiness with those customers. But even before that, I'd say that from a large enterprise perspective, strength in our whole market, we've realized its quite important for our global story as well. So when we break into a large global bank or insurance company or a retail company, very often, the route into them is by building a relationship in India, building a relationship for services into India. So the stronger we're in India, we've seen a correlation to how strong we can be with our non-India business. And the strength of the network that TTSL brings to the table is quite important for us. The options that we have to go to other players to get network reach into the Tier 3, Tier 4 towns, which is where the economic activity is shifting in India, is limited. The number of players here is consolidating and last-mile options are depleting. So we need to either go build a massive last-mile network ourselves or go buy a company like TTSL that has a big footprint on last mile that we can then take to a large enterprise services to sell them network services and progressively other services. Therefore, we believe that due to a combination of meeting the strength in our India footprint, in enterprise, to increase our product reach and to drive our services into another customer segment, which is the S -- midsized enterprise customers in India. All 3 of those leads us to believe that this is a good acquisition.
So should we assume that potentially given your capital employed is going to double, that, that business will be able to deliver the kind of EBITDA that your current capital employed is delivering?
Yes. We believe that we will get a good return on the capital that we employed to acquire the SMB business.
This is Shariq from Quest Investments. So you called out digital transformation as a cost optimization tool. Now could you launch that a little more by highlighting where all these investments are going and quantify those investments? Also, the time period over which this will start to be was $1 billion cost savings. And how much cost savings should we expect?
When you say the new -- where we're spending in terms of what programs?
Yes. Yes.
That's a bit difficult because there's a lot of detail there, but it's 2 things, right? One is we're cleaning up our internal systems so we can deal -- have far simpler processes and avoid duplication of work that today you have either because they're manual or being done in multiple systems and there's not a 100% overlap, but there's duplication of work. That's elimination of that. And the other is about digitizing the customer experience. The spend that we're projecting, right, as we're still maintaining that we will be -- beginning last year, we said it will be a $100 million spend over a 5-year period and we're maintaining that although we believe that we can do it for less. The plans are still being fine-tuned. So I don't have a device number that I will give. It will fit within the CapEx envelopes that we projected, and we've given the sort of forward-looking view on our cost productivity as well. The -- this -- if I had to split that between what goes into external customer experience and internal, it is -- probably 60% is related to aspects of the customer experience and about 35% to 40% will be on digitizing our internal workflows, although, frankly, the internal digital flows also have an impact on customer. It's tough to draw that line. But if I had to split, it would be 60-40.
So if I look at the FY -- sorry.
And I can specifically give you the numbers. We've still spent sub-$10 million on our digital transformation journey. And the reason we were able to confidently put forth some of the productivity that we are likely to see in the future stems from the benefits that we're starting to see as we invest it.
So the FY '21 EBITDA number that you've put out, the margin number, that factors in 100% of the benefits of digital transformation. That's a fair understanding?
I would -- it factors, again, whether it's 100% or not.
Because you're still at a very early stage in terms of investments, right? You're still at $10 million versus what you earlier...
It factors investments in. We will start seeing benefits of that even in this fiscal year. The reason why we are able to say that we will keep manpower, we'll reduce our manpower, cost increased to 5% CAGR is because of that, right? And over time, it will only improve, but the full benefit will take probably 4, 5 years before it shows up. But it'll start showing up from the second half of this year.
My second question is on MOVE and security. You also called that out as being meaningful growth drivers for FY '19. So I just want to understand how scalable this piece can be over a 3-, 4-, 5-year period. And when will it start to become meaningfully margin accretive?
As I called out in the FY '21 numbers, we believe that MOVE and IoT will be contributing $100 million each. The incubation portfolio as a whole will start being EBITDA accretive in FY '21.
[ Vinod Sandeep ] from Fidelity. Two questions. First is you talked about collaboration and embedding yourselves into services, which will pay off in one of your slides. If you could just give some more color what are the kind of things you are talking about. And second is just on the customer metrics. You're focusing more on same customers, the top 300, top 1,000. So how big the customers can become, like 100 million, 50 million? What's the potential as you think about the '21 journey?
Okay. So I'll have James answer the second question. So start thinking, James, of how much you want to commit. No. We have a good -- a shared view on it. But it's very tough to answer the platform question without using names and it's -- we're not authorized to. But there are 2 large collaboration providers in the world who are competing for space right now, the third one coming in. These are all very well-known names. So we are one of the handful of SIP trunking providers, for example, embedded into their platform. So as they sell their license to a large enterprise that may have 10,000 employees, and those 10,000 employees sign up for an unlimited package for using voice and video communication, let's say, at $10 a month, the traffic that starts flowing through will be on our SIP trunks and we start getting a lift from that. So we don't -- that's a case of a classical B2B2B platform play, right? So we have been embedded in a SIP trunking into a couple of large global platforms and especially for the customers that will sign up in APAC and India. It's one example. Another one is IoT. Another big platform play will be announced fairly soon where we are 1 of 4 global partners that will provide the underlying network connectivity anytime they sell compute or the application related to IoT, right? Again, that will be probably -- it's also a B2B play, but it also is a B2B to developer community play because there will be developer communities who will be building applications on top of the compute platform that this provider offers. And there'll be an automatic pull-through of our NetFoundry application-aware networking that goes with it. So we don't need to go and sell into every one of these customers. The end users, it'll be pulled along with the platform. Hope that gives you a flavor of that. James, on large-scale customer?
Yes. And so when we look at -- there's a couple of things that we track. First, we track how many customers buy tranche of revenue. So how many do we have at $1 million? How many do we have at $5 million? How many do we have at $10 million? How many do we have at $25 million? And then look at that shift of customers over time. And so we just actually looked at that data over the last 3 years. And so where we're driving, obviously, the penetration, we're seeing that migration up the stack. When we look at share of wallet per customer as a percentage of IT spend, that's where you start to define what your thresholds are. And so can we get 20% share of wallet for any client's IT spend, and then that would be your theoretical upper end for a customer as a function of their IT budget. And then with that, how much percentage of share can you get realistically? And there's always going to be this notion of diversity that a client's going to want to have in their infrastructure, certainly, on the network side. And so those percentages vary. We have clients that I just met this week in India where we have 100%. They completely outsource their full network. We are a sole source, sole provider for them in this market. And then we have other clients where we're 10%, 20%, and realistically, we should be breaking this up to that 50% and some of it are, let's say, traditional products at the network side under diversity. And then other areas who've done growth services, it should be 100% penetration. So if we win our Unified Communication stack, we should have all the seats in the business and so that's like a full penetrated account. So the gating factor is the size, the customer, their IT spend, and some will have a disproportionate amount of spend within our services. But on average, it can -- you'd say, around 20%, we'll start to find that. And we do have clients that are north of $20 million in revenue for us today. And so our opportunity is as we see in that chart, it's significant. There's a lot of headroom that we have in each client to grow and take share of wallet.
If I have to give you a number, a [ SIP trunk account ], $10 million to $12 million would be a midsized customer for us based on the PPR that we're aiming for, right, and that's where we expect to grow. We have customers, like James said, who are north of $25 million, but that takes time to build, especially on the services side talking about IR use and so on. But -- and we will have -- that number will grow but the sweet middle will be $10 million, $12 million, $15 million range. And that's -- our sales teams are driving that kind of product penetration strategy.
We have a question from one of the participants on the webcast. It's from Mehul Patel of M.J. Share and Stock Brokers. He says with TCS reporting more than 25% of revenue coming from digital and looking at the fact that Tata Communications business is nothing but digital, do you see future collaboration with TCS?
We constantly look for opportunities to work with TCS and -- but you know how the group is structured. We have to work when there is compelling benefit. We are not forced to buy or sell from each other, nor are we forced to do any go to market unless there's benefit on both sides. Having said that, I will say that the level of work we do at TCS over the years has steadily increased. And with services like MOVE and IoT, the opportunity is actually increasing and we have more organic activity that we're doing but it really is based on merit. I want to be very clear about that. But we are becoming more relevant to some of the large digital transformations they drive. So it will -- I am confident that it will grow based on the strength of what we have. I'll say equally that we are growing with some other SIs as well, where we are becoming more and more relevant to what we do -- what they do, sorry.
Any other questions from the participants in the room? I think people liked our presentation too much.
Just for your information, we have our -- I don't know how many of them are listening, but for the first time, we've opened up this analyst call and we will do every quarterly 1 to our top 200 managers in the company because I want them to hear the questions you ask me, and I want them to hear what I commit to you. So they're also in it with me. Hope you're listening, guys.
I'm Neerav from Maybank. Wondering, all the CapEx plans going ahead, is there any change in the CapEx plans with the '21 strategy?
No. We're maintaining CapEx in the range of $250 million to $275 million, but we will be -- we'll continue to maintain the same rigor and discipline that we showed last year.
And I can promise you, I don't allow them to spend.
Yes, boss.
And that's why you know why my finger is injured.
This is Miten from HDFC Mutual Fund. Innovation services revenue was practically nothing this year and we have put a number of $150 million in fiscal '21. Is there a very large item to it? Or what gives us the confidence of being able to reach $150 million out of that suite of services?
We are seeing that on the back of the funnel activity and the orders that we have in hand and the momentum that we see picking up.
So is that essentially MOVE?
It's -- no. It's MOVE, IoT, SDWAN. I had that all 4 listed in security.
I'm Trupti from White Oak Capital. I just wanted to understand that in the growth services that we're talking about, what would be like some of the relevant competition? Could you just give me a few names so that I understand this?
In growth or in...
In growth, in growth.
In growth, okay. Growth, if you look at SIP trunking or UC portfolio, we have SDWAN. So UC is probably more -- it's competition from telcos. Typically, it'll be an extension offering from telcos. When it comes to SDWAN, we have both telcos but also some start-ups. But the start-ups like [ Ruptela ] and so on tend to compete more in the domestic U.S. market. But in the growth services, I'd say, by and large, we are dealing with other telecom companies as far as UC and SDWAN are concerned. We also have the hosting services, the cloud compute storage services. There, it fragments. We'll have systems integrators. We'll have some of the OEM companies as well as the telcos competing. So it's -- that's the mix.
Sure. And I just have one more question. So you said that one of the strategies would be to make inroads in the SMEs, right? Just -- I mean, I don't know if my understanding is right. Please help me understand this better. The IoT kind of services, do you think are they really relevant for SME?
No. I'll clarify what I said. Mr. James Parker here will focus on large enterprises, right, and that will be the single-minded focus that we have. And our customers tend to be fairly large customers, right, like ET 500 companies, big Fortune 500 companies, companies which are in the tens of billions of -- $10 billion to $25 billion in revenue is kind of our sweet spot. That's where we'll be selling services like IoT and so on. I was talking about the SMB market in India, which is growing very rapidly, which is what we will acquire to the TTSL business. There, the selling model is low touch. It's heavily through small partners and small systems integrators. It's across 35 cities in India. Ticket sizes are much smaller. It's self-provisioning kind of sales model that we will pursue. We won't be trying to sell IoT into that customer segment. There, it will be connectivity. Our compute and storage has some relevance. Some of our off-the-shelf security services, not the complex portfolio that James will go on sell. So there are elements there that we can pick and bundle along with connectivity and sell into that segment.
Just to be clear about this. Innovation services, you said, will be about $150 million in FY '21 and you included MOVE and IoT in that. And separately, you mentioned that both will be $100 million each by FY '21. So I was sort of excluding them and looking at that $150 million.
$150 million to $200 million.
No. But you said SDWAN and security is also part of that.
No. SDWAN is in growth.
[ Afghani ] from Discovery Capital. Consistently, on the growth services, we saw your '21 projections becoming a large part of the revenue as a higher percentage of revenue as well as the EBITDA margin. So even if you were to achieve your 35% growth on the revenue side, what is the level of comfort you have over the risk you see in terms of the EBITDA margin being achieved considering that we missed EBITDA targets earlier in this segment? So when are the benefits going to kick in? Because to achieve those revenues, wouldn't you have to spend a similar amount of money in terms of the investment aspects?
I'll say the early days is actually more difficult to predict the mix of the services. So if you look at the funnel that we have, it -- we have a very good blend of services. But how they commissioned and get delivered over to customers has a shorter-term impact on the margin profile, which is what we call wrong for this year, right? However, when I look at it from a longer-term perspective, I know the blend will be more a balanced blend across services and the margin profile is easier to predict. So I'm more comfortable with the 3-year view than saying, okay, this month, we will get to this, especially now when we are building operating leverage, right? So I feel confident about that mix rather than saying next quarter, what it will be or the -- in the next 6 months.
Vinod, before we end, there's another question from the webcast participant. Can you please update on the status of land demerger?
Land demerger, as you know, as part of the NCLT process, we had the shareholder meeting yesterday and 99.9% -- Vipul, what was the...
99.9%.
99.9% of the shareholders were in favor. So that moves to the next stage. We expect -- I know it's obviously against -- there's some approvals that are required from various government agencies at different points. But by around September, the land merger should conclude based on our estimate now.
If there are no more questions in the room, we would like to end the event. I'll just call once again, any other questions? Thank you. On behalf of Tata Communications, I thank you all to join us for this event, and you may please join us for the dinner. Thank you so much. We'll see you again next year.