Sify Ltd, the largest aggregator of bandwidth in India, is betting on data traffic to carry it towards profitability.

The Rs 200 crore (Rs 2 billion) Internet service and solutions provider has in the recent past invested in a world-class IP network, which has propelled it into the big league of service providers such as SingTel, Telstra and AT&T.

"Now it is a case of when we become profitable rather than will we?" says George Zacharias, president and COO of Sify Ltd.

"Over the past four quarters we have shown that we are on the road to achieving operating profit," Zacharias points out.

Sify has in the last consecutive quarters increased its revenues and managed to reduce cash burn.

Zacharias confidence is not without reason. With a humongously big capacity in place, Sify is expected to take advantage of the booming needs of corporate India's data capacity needs.

According to a Frost and Sullivan report the Indian virtual private market, which operate on IP (Internet protocol) technology, estimated to be worth $25 million in 2002, is expected to zoom to $65 million in 2003 and touch about $180 million in 2008.

VPNs typically carry more data traffic than voice traffic in India.

And Sify itself is seeing traction. The company has been ranked as the number one player in this segment by IDC and its decision last year to acquire the No 2 player Wipro Net, has ensured that its leadership in the Indian marketplace has become redoubtable.

"Ninety per cent of our revenues comes from data services, while voice traffic accounts for only about 5 per cent of our total business now. It is important that we concentrate on the data market," Zacharias said.

IDC has also pointed out that by virtue of being cash-rich, Sify is best positioned to ensure that it is able to continue to dominate the market for VPNs. Sify had cash in hand worth Rs 104 crore (Rs 1.04 billion) or $22 million as of the last quarter ended December 31, 2002.

"Our incremental costs are almost next to nothing. We have invested close to Rs 300 crore (Rs 3 billion) on infrastructure, our associate costs are not going up and big cost elements like bandwidth and technology upgradation have all been taken care of.

"We are now in a position to start leveraging our investments in infrastructure," Zacharias says, indicating that now the focus in the company is purely on RoI (return on investment).

Sify will, through the implementation of a Tier 1 network, be able to offer the highest level of performance to customers and can carry terabits of data.

This has been achieved through having Cisco gigabit switch routers in place, the fastest routers in their class, capable of routing 30 million packets per second.

"Apart from performance we will be able to offer scalability, reliability, the best security and the best quality of service initiatives in the market through this Tier 1 network," Zacharias points out.

But what about operating profits and then eventually net profits for a company that has been historically in the news for reporting huge losses thanks to its Nasdaq listing and resultant US GAAP accounting norms.

Zacharias refuses comment citing the strict forward looking statements bar that the SEC has put in place.

But according to a Singapore-based analyst Sify may in all probability make operating profits in the next quarter, while net profitability is still a full year away.

"Their infrastructure and staff costs are fixed and now whatever additional business they carry will straight add to their bottomline. I would expect the company to report net profits in 2004-2005."