Sankhya Vahini To Require Rs 2,550 Cr
Sankhya Vahini India Ltd (SVIL) will require an investment of Rs 2,550 crore in 10 years, of which Rs 650 crore will come in the first year itself.
Of the total expenses, the capital cost is expected to be about Rs 1,534 crore, and the operating cost Rs 1,009 crore. In the first year, the capital cost is pegged at Rs 470.77 crore and the operating cost at Rs 175 crore.
These estimates are based on a memorandum presented to the Telecom Commission by the department of telecommunications. The draft joint venture agreement and articles of association of the high-speed data network project are being vetted by the law ministry.
Sankhya Vahini's services in major towns will commence after a year of signing the joint venture. The project is not expected to make any profits in the first five years.
The financial viability of the project has been prepared in consultation with IUNet, which will hold 49 per cent in the proposed joint venture. Other stake holders include the Department of Telecom Services (45 per cent), ministry of information technology (2 per cent) and educational institutions (4 per cent).
A minimum internal rate of return (IRR) of 20.63 per cent on discounted cash flow for 10 years has been assumed for the project. However, this figure may drop in case the assumptions change.
"The revenue model is based on a conservative estimate and it could change if the assumptions change," a source said.
According to estimates, the minimum level to which the IRR may drop is 10 per cent, in case gateway access charges increase by 25 per cent. On the other hand, IRR may increase to over 25 per cent if broadband demand, as a percentage of total demand, goes up by 10 per cent.
Also, an increase in equipment prices, including costs of optical equipment, routers and Synchronous Digital Hierarchy (SDH) equipment, may effect a change in the IRR. A 20 per cent increase in equipment cost will pull down the IRR to around 18 per cent, while a 40 per cent rise will pull it to 17 per cent.
The equipment costs are based on estimates made by IUNet, the special purpose vehicle of Pittsburg-based Carnegie Mellon University. The figures were arrived at through enquiries from leading optical networking firms like Cisco, Lucent, Siemens and Nortel. The fibre cost estimates are based on the records provided by DoT and DTS. The values of some equipment and fibre are, however, likely to change once a detailed scrutiny is carried out.