Indian broadband provider Tikona Digital Networks is ceasing operations in 13 of 38 cities in order to consolidate its coverage in top tier areas in the country, but denies speculation that it is part of a plan to put a stake up for sale.
"We have chosen to consolidate and expand our coverage and capacity in the top six metros and 19 Tier 1 cities, making us the leading broadband operator in the top 25 markets of the country in respect of coverage, capacity and share of new additions," the Mumbai-based company said in an Economic Times report Tuesday.
According to two investment bankers who declined to be named, the move is a precursor to a possible company stake sale, according to the report. Goldman Sachs, venture capital firm Oak Investment Partners and private equity firm Everstone Capital Advisors own a combined 70 percent stake in the company, the report noted.
Tikona denied any plans of such a sale, saying there was "no such event in the current horizon", and added it recently closed another round of equity raised from current investors.
According to one of the investment bankers, Tikona uprooted its entire network from the cities it exited, so it could redeploy the equipment elsewhere.
Another unnamed source, who is familiar with the developments at Tikona, added the company recently made some salary cuts, something the company similarly dismissed, the report said.
"Our consolidation strategy has had a significant impact on our EBITDA (earnings before interest, tax, depreciation and amortization), which has improved by 100 percent in the last one year. We are on the path of achieving break-even within first four years of commercial operations," Tikona explained.
It added there was strong demand for broadband services in India, with ARPU (average revenue per user) levels of broadband continually increasing in contrast to falling ARPU levels for voice. "The supply side [for data] is far less crowded than in voice, thereby giving early movers like Tikona an advantage to make inroads in data markets."
Earlier this month, Tikona was said to be looking to raise some INR 10 billion (US$182.6 million) to help it launch 4G mobile broadband services, Economic Times reported.
It previously won wireless broadband spectrum in five areas in a government auction in 2010 for INR 10.58 billion (US$193 million), but will launch the 4G services only near the end of 2013, the report noted.
Tikona said its Wi-Fi broadband network currently covers the top 25 cities in India, most of which are outside those five areas. And once its offers the 4G service, it will simultaneously offer Wi-Fi services as well, it added.