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 Launched
with much fanfare, communications company Deltagram is facing
multiple problems today, with Kolkata franchisees on the warpath
and its entire business model in serious doubt. Rajneesh De
investigates
Deltagram,
one of the first private initiatives that sought to bring
in new generation communication technologies at affordable
prices something that India’s postal department is hard
pressed to do seems to be tottering today, thanks to controversies
surrounding the company, especially in the Eastern region.
The controversies seem especially unfortunate when one takes
into account that unlike other infamous failures like S Kumar’s
e-com initiative, this project did takeoff the ground and
was not simply restricted to just a launch.
The Chennai-based company’s ambitious project envisaged
a capital outlay of Rs 250 crore and was supposed to be implemented
in phases by December 2002. The original plan called for a
multi-layered architecture with the central server located
in Chennai, which was in turn connected via INSAT 3C to hubs
and franchisee networks in over 250 towns and cities across
the country. The grandiose plan aimed at establishing a nationwide
presence in 27,000-odd postal pincode areas by December 2002.
The communications services to be offered included phone-to-phone,
phone-to-fax and fax-to-fax messaging services for Rs 5 and
above per message. Other services included pager messaging
services and e-commerce facilities for those having no access
to computers. To facilitate usage of service, Delta introduced
prepaid e-call cards priced as low as Rs 5 each.
The attractive picture that Deltagram painted attracted PCO
owners, whose earnings were fast coming down thanks to the
free falling long distance rates. The sprawling metropolis
of Kolkata was no exception with a number of people queuing
up for a franchise once Deltagram operations were launched
there on January 31, 2001.
These Satmail (Satellite Mail) franchisees from Kolkata included
Sarat Kumar Sinha (for Pincode 700068, Jodhpur Park), Bimal
Seal (for Pincode 700029, Dover Lane), Rontu Gupta (for Pincode
700095, Golf Green) and Amit Bhattacharya. In all, about 25
to 30 people in Kolkata supposedly paid amounts ranging from
Rs 20,000 to
Rs
1,00,000, either as an advance or in full to become Deltagram
franchisees. As per the agreement with these franchisees,
Deltagram promised to complete all formalities and put all
services in place by February 15, 2001.
The franchisees waited till April and then contacted the Chennai
HQ. According to the franchisees, Major G V Raju, vice president-administration,
Deltagram, told franchisees in a letter in April (EC has a
copy of the document) that a prior commitment to have 60 hubs
nationwide by March 2001, contributed to a delay in commencing
business activities at Kolkata. He further informed them that
the e-commerce platform was ready and advocated a little patience
and promised that the launch would not be delayed any later
than end-April.
With nothing happening even till July, the franchisees were
running out of patience, considering that considerable amounts
were paid up front to the company. The franchisees allege
that R Kothandaraman, managing director of Deltagram then
put forward vague excuses for the delay. A letter sent to
franchisee Sarat Kumar Sinha (EC has a copy of the document)
by Kothandaraman says: “Somehow, various developments
and circumstances overtook the faith and confidence that I
had reposed in certain quarters, and as a result, we were
unable to fulfil some of the obligations and promises made
to you in time. I also wish to take this opportunity to place
on record my sincere appreciation and thanks for the patience
and trust you have displayed during these trying months. As
you are all aware, our project, right from the conceptual
stage, has been bestowed with tremendous market potential
(valued at nearly Rs 5,000 crore in the fifth year of operation).
Having reached this far, I am sure you will agree, we should
continue to make all out efforts to tap this vast potential
to the fullest extent in order to make our dreams come true.”
Kothandaraman goes on to say in the letter that the delay
in disbursal of finance by IDFC and IDBI (the two financial
institutions had agreed to finance the project to the extent
of Rs 30 crore) landed Deltagram in this critical situation.
However, the franchisees allege that even after this long-winded
explanation, no action was forthcoming, though Kothandaraman
clearly says in the letter that, “the entire system will
be back on its rails, and all dues would be cleared,”
not beyond August 2001. The Kolkata franchisees then demanded
a refund from Deltagram in October 2001. But the company allegedly
refused to acknowledge any communication in this respect,
and when the franchisees sent their representative Rajkumari
Bagree to Chennai, no senior Deltagram officials were available
to meet her.
To add to their woes, the franchisees say that the franchisee
rate later was fixed at Rs 30,000 instead of Rs 1,00,000.
But despite several reminders, Deltagram refused to return
the balance too. One more grouse all the franchisees had was
the fact that Deltagram was not really in the pink of health
on the financial front, and this was apparently not revealed
to them at the time of launch. As time went on, it became
pretty evident to them that the company’s precarious
financial position was responsible for operations not taking
off.
However, what is strange is that in the meantime some business
announcements were being periodically made in Chennai, while
franchisees who had parted with their hard-earned money were
left in the lurch. Repeated efforts by Express Computer to
contact Deltagram on this issue proved futile. The company
did not respond to e-mail and telephone calls, both to the
office as well as the directors’ home and mobile phone
numbers, and even when we managed to get some senior officials
on the phone, they refused to comment and kept passing the
buck.
The situation at the Deltagram office in Kolkata is presently
grim. According to the Kolkata franchisees, the landlords
(Ashok Chatterjee/Subroto Chatterjee) have told them that
no rent has been received from the company’s Chennai
office since October 2001. The franchisees further allege
that the 3-4 people who work at the office have also not been
paid their salaries for the past 4-6 months.
With no recourse left, the Kolkata franchisees have now decided
to take police action. The Investigation Officer of the Special
Branch of the Calcutta Police has recommended that all Deltagram
franchisees in Kolkata and Howrah jointly lodge an FIR and
move court to seek prayer under Section 156 (Clause III) of
Cr.P.C. Thereafter, the case can be dealt by the Anti-Cheating
Cell of the Calcutta Police.
If this happens, it will come as a serious blow to Deltagram,
especially because of the financial position is supposedly
is in. The company may not recover from such a blow. This,
coupled with complaints from some potential franchisee seekers
from Delhi like Mahender Dua who recount an experience similar
to counterparts in Kolkata, erodes the credibility of Deltagram.
And even in the Capital, Deltagram offices are virtually shut
down with telephone connections cut off due to non-payment
of bills, says Dua.
Even on the customer front, there seems to more than what
meets the eye. According to an official release in December,
Deltagram claims to have connected over 250 towns with over
5,000 collection centres all over the country. It also claims
to have 35,000 members with over 2 million messages transacted
by over 2.5 lakh customers. Against its initial stated objective
till December 2002, this is not too bad a report card. However,
a senior official of one of India’s training majors whom
Deltagram claims is a client refutes it outright. That again,
does not help Deltagram’s case. Plus, the complete stonewalling
of all of Express Computer’s multiple queries also raises
significant doubts about the company’s willingness to
come clean.
One excuse the company might put up for this holy mess has
been the rejection of the loan proposal by IDFC. But this
rejection definitely calls into question the viability of
Deltagram’s business model. All in all, it’s time
the company came clean-else a serious blow would have been
dealt to one of India’s most ambitious private initiatives
in communications.
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