There is a keen sense of excitement at Tata Teleservices Limited (TTSL), the telecom arm of the 96-firm Tata conglomerate. A reflection, perhaps, of the dynamism and energy that Managing Director Anil Sardana has brought with him.
The former Tata Power chief, who took over the reins of TTSL only three months ago, has been associated with the Tata Group for years. He is known to be systematic, clear thinking and target oriented. He helped establish NDPL (a joint venture between Tata Power and the Delhi government), and also ensured that the company overachieved its targets in reducing power distribution losses.
He now seems to have ambitious plans for the group’s telecom venture as well. He has his sights on achieving a 15 per cent market share for TTSL in the near future.His confidence stems in a big way from the company’s performance over the past few years. It has become visibly more aggressive. And at a time when other telecom operators have been experiencing a downturn in subscriber additions, it has defied sceptics and crossed the 20 million subscriber mark, upping its market share from a mere 3 per cent in 2004 to about 10 per cent now.
“Investors worried about Tata’s slow pace in mobile growth are lauding its efforts now,” observes the head, portfolio management at Mumbai brokerage SSKI Investor Services.
Still, targeting a significant increase in market share could be a bit tricky given the extremely competitive telecom environment, where the game is all about snagging subscribers and market share, say analysts.The challenge before Sardana is to push TTSL’s growth to the next level. In the past few months, perceiving a threat from the deluge of interested players queuing up for a unified access service licence (UASL), nearly all telecom operators have chalked out resolute plans to win subscribers.
A look at the figures shows that in the past nine to 10 months, TTSL’s wireless market share has hovered between 9.7 and 9.9 per cent, going down to 9.48 per cent in September 2007. In wireline, it has a marginal presence of around 1.4 per cent, with 580,000 subscribers as of June 2007.”Our market share has stagnated at around 9.7-9.8 per cent recently,” agrees Sardana.”But we are gearing up to push growth to the next orbit. We already have a thoughtout strategy, which is looking at consolidating the current position. The market can expect to see many new initiatives and offerings from us in the near future.”
Changing face
In this direction, Sardana is focusing on providing support to each function of the organisation in order to touch benchmark levels, with extra emphasis on customer service and differentiated customer offerings.
The past two months have been a period of major assessment and redefining of processes at TTSL. There has been a tremendous amount of back-end work.The top deck, for one, is being reshuffled with an eye to realigning the company for future growth. Vineet Bhatia has been brought in as regional head, North India, including Delhi, replacing erstwhile Delhi circle’s chief operating officer (COO) Debasish Sur, who is now expected to work a similar magic on the company’s enterprise business as he did with TTSL’s Delhi circle. Likewise, Jehangir Ardeshir has been moved up from president, business excellence, to the position of executive president, corporate services, while Vinayak Deshpande, former president, enterprise and high net worth business unit, has been made executive president, overseeing the entire operations of the company. C.N. Nagakumar, meanwhile, has come in as chief human resource officer, and the Andhra Pradesh and Orissa circles have new COOs ?? Ramakrishna S.and Harsh Chandra respectively.
In another development, breaking away from its earlier position of backing CDMA technology alone, TTSL has decided to apply for spectrum to operate GSM-based mobile services across the country. This move follows the government’s recent policy announcement allowing dual technologies on a UASL.
For TTSL, which opted out of the Idea Cellular GSM venture, the rationale now is that since most other CDMA players have opted for GSM to handle the voice part of their business, it would not like to be left behind. “Ultimately, it is the volumes in terms of devices and associated equipment that impact prices in the marketplace. We obviously need to have a level playing field when pitted against other players,” notes Sardana. The additional spectrum would, of course, also be useful.
“Both HFCL and Reliance have been given the green signal to operate GSM services. TTSL would also stand to gain from the same. It would definitely mean getting spectrum for the company, which is always at a premium. If TTSL can manage it well, it can assure better quality network services,” says Abhishek Kapoor, manager, advisory services, KPMG.
Telecom analyst Mahesh Uppal is, however, not that sure. “Maintaining a parallel network will not be easy. Perhaps in specific areas, like the metros, it would be nice to have a presence in both GSM and CDMA, but I don’t imagine the company would want to set up a countrywide parallel GSM network,” he says. While the debate on spectrum and GSM versus CDMA is unending, the Tatas are waiting for the government’s final decision.
Meanwhile, the company has moved ahead with its massive rebranding exercise.Tata Indicom, the umbrella brand under which the group’s entire telecom activities are consolidated, has been given a big blue splash. Coming close on the heels of rival Vodafone’s “paint the town red” drive a month ago, Tata Indicom’s effort is to reenergise the Tata brand experience.
Says Abdul Khan, president, marketing communications: “We are painting the town blue. Our focus is to push forward the brand with a focus on the mass market and street visibility. We are installing blue zones, signs, and even painting the streets blue as we need to extend our appeal across different segments.”
The company is also looking at expanding its retail network by taking its retail store count to 3,500, with all its True Value hubs renamed as Tata Indicom Exclusive Stores. The aim of the exercise is to gradually transit from being a mere “value for money” brand to an aspirational brand that caters to the diverse needs of its users.There is a shift in emphasis from low pricing (which was the initial criterion to keep pace with Reliance, the prime mover in CDMA) to differentiated products like USP modems and data cards, which leverage the higher data capabilities of CDMA.
Background
A relatively late entrant into the mobile segment, TTSL began full-fledged operations only in 2004, after the UASL regime came into existence. Its fixed line operations, though older (since 1996), were limited to a few circles only.
At a time when its rivals were aggressively wooing customers, TTSL, a moderate risk-taker, preferred to wait. The group’s attempts at providing long distance services too did not pan out as expected. In 2002, it paid $530 million for a 46 per cent stake in the state-owned international long distance (ILD) monopoly, Videsh Sanchar Nigam Limited (VSNL). But the sector was deregulated soon after, leaving VSNL to grapple with stiff competition and a collapse in rates. Its inherited PSU baggage didn’t help the situation either.
The Tatas also lost time cashing in on the national long distance (NLD) segment, the licence for which came free, in return for the premature termination of VSNL’s monopoly. Bharti and Reliance, on the other hand, leveraged their NLD and ILD licences to push their own traffic onto the international network. Also around the same time, state-run Bharat Sanchar Nigam Limited (BSNL) and Mahanagar Telephone Nigam Limited (MTNL) received NLD and ILD licences, which meant that VSNL had to look for other business avenues.
Today, though it offers the entire range of telecom services ?? mobile, wireline, fixed wireless, public booth telephony, long distance and broadband services ?? TTSL is still paying dearly for its initial lapse in terms of subscriber numbers. Though among the top telecom operators of the country, TTSL occupies the lowest rung in the top five pecking order.
Clearly, the telecom arm of the $22 billion Tata Group still has a lot of catching up to do. With 19.49 million subscribers as of September 2007, it trails far behind Bharti Airtel (48.87 million subscribers), Vodafone (35.65 million), Reliance Communications (31.28 million excluding GSM) and BSNL (30.3 million).
Course correction
Realising that the lucrative Indian mobile telephony market is too huge a business TTSL needs to invest a lot of resources in protecting the environment for CDMA technology users as there are now fewer takers of this technology.opportunity for the country’s oldest business house to pass up, Tata has been working to reinvent itself. Ratan Tata, chairman, Tata Group, took over the reins of TTSL in 2005 and started giving it shape. Over the next two years, TTSL brought to the market several innovative value-added services and schemes like lifetime validity, Non-Stop Mobile and Don’t Stop. It invested in brand promotion and tied up with handset makers like ZTE and Huawei to offer handsets priced as low as Rs 1,500.It was also one of the first to introduce its own range of branded handsets.
The other area that it focused on was enterprise customers. Leveraging the strengths of other Tata group companies like VSNL or Tata Consultancy Services (TCS), TTSL decided to offer customised end-to-end telecom solutions to corporates through its newly set up Tata Indicom Enterprise Business Unit (TIEBU).
VSNL, meanwhile, embarked on the acquisition route. It bought Tyco Global Network (TGN) and Teleglobe, which gave it access to a 60,000 km state-of-theart undersea cable network covering North America, Europe and Asia. This allowed the company to compete in the wholesale voice business. Overall, the company’s prospects started to look up.
Strengths and concerns: Outside perspective
The Tata Group, in business since 1868, lends TTSL its strong brand name and respectability. As Sardana says, “The Tata name stands for fair play, reliability and trust for all segments of our customers.”
Uppal notes: “TTSL comes from a blue chip business house of the country. Its strength is its nationwide network and its access to funds. Besides, it is working with a better technology, CDMA, in which it will perhaps remain the only serious player.Also, it has been doing rather well and is one of the few companies to have increased its market share in virtually every circle.”
That said, analysts feel there are a few grey areas that the company should look at. For instance, its rivals are much ahead on the curve having had the time and experience to put in place stronger processes, controls, compliances, customer management and marketing. For TTSL, on the other hand, the pace of growth is still relatively new. “Therefore, for it to expand fast entails a lot of keeping up with the market. All their processes need to be in tune with market dynamics to ensure unhampered growth for which they may go in for new systems or spruce up their existing one,” says Sourabh Kaushal, industry manager, ICT practice, Frost & Sullivan.
The top management seems to be working in this direction. In the past few months, it has been giving attention to all its interface points to improve customer relationships. IT intervention is being undertaken in a big way. There is also a huge amount of training and development taking place at all engagement points.
One area that the company needs to watch out for is regulation. According to industry watchers, TTSL needs to invest a lot of resources in protecting the environment for CDMA technology users as there are now fewer takers of this technology.
“Its regulatory strategy needs to be firmer. Its advocacy is perhaps not as good as that of many of its rivals. For example, it lost out on its FWP service front as its advocacy was not strong enough. An FWP handset cannot be carried along as a mobile phone, just as one would not carry a clock in the pocket because it tells the time. They are different products ?? mobile phones are carried in the pocket but fixed mobile phones are not. In my view, it is a failure of advocacy as the company should have been able to convince the regulator,” claims Uppal. In fact, market watchers go a step further to say that in this context, the competition is probably better off as it has been able to manage a regulatory environment that is far more conducive and favourable to their products and services.
Apart from high attrition rates that all telecom operators have to cope with, competition is another area that TTSL needs to be wary of. With the entry of Vodafone, the competition is expected to only get stiffer. Though TTSL doesn’t seem to be worried at the moment, Vodafone, with its global scale of operations, can put cross-economies of scale to work and bring in its substantial expertise in 3G, marketing and innovative services to play in the Indian market. Vodafone is also looking at capturing 25 per cent market share by the end of 2008.
“The key challenge for TTSL will be to continue holding its market share, especially in areas that are profitable like cities and towns. The most difficult aspect would be to break the hold of the existing operators.Mobile consumers do not often change their service provider unless faced with serious and continuous inefficiency in service.Hence, Tata would not only need to ensure that it is continuously providing top-of-thegrade service but also be creative in its strategies while entering any particular market,” says Namrta Sudan, analyst, Kochhar and Company.
Reports also suggest that though revenues are improving, the company still has to service a sizeable bad debt and will take time to break even. While it does have deep pockets, TTSL’s borrowings are high as a large part of the revenue goes towards capex, adding to depreciation costs. However, the company is not looking at equity dilution in the near future to fund expansion.
On the business side, TTSL’s fixed line business has been under pressure as has its broadband service offered on wireline. In comparison to mobile growth, the growth in wireline services has been marginal (it had 627,355 subscribers as of September 2007). According to company officials, this has been on account of lack of adequate clarity on policy. Initially, a large part of the growth in the wireline segment had been on account of its Walky service, which was later deemed as a mobile service.
Also, as Sardana says, “There could have been more consolidation had 3G services been allowed. It’s sheer economic waste to invest in something that may not be required. Also, there are several associated issues like right of way, digging in cities and physically hanging wires, which can be avoided through EVDO and 3G services. It is sad that some segments of operators and policy-makers have not allowed customers to benefit for political reasons.”
Growth path
On TTSL’s agenda is offering broadband services, and special packages for enterprise and residential customers. For instance, the company is looking at multi-storey apartments, new townships and colonies where the incumbents are not already entrenched and TTSL can make a dent easily. TTSL has already launched triple-play services in Gurgaon and is planning to do the same in Mumbai and Hyderabad.
As with all other telecom players, rural telephony will be a key thrust area. Of the total investments of Rs 40 billion earmarked for the year, about one-third will go towards rural expansion, while Rs 15 billion will be used to strengthen the existing network and Rs 10 billion will be set aside for wireline and other initiatives.
Enterprise is another area that the company is focusing on. Leveraging on the higher data capabilities and right partnerships that exist within the Tata ecosystem, such as VSNL or Tata Consultancy Services, company officials state that TTSL is in a better position to offer customised enterprise solutions than are its rivals. It is already looking at making a pitch to promoters of special economic zones before they put their infrastructure in place.
“The enterprise segment is the right channel to open up opportunities that get us the right kind of customers and the right kind of ARPUs,” says Sardana. “The Tatas are absolutely positioned to do that.We hold tremendous amount of enterprise knowledge and right partnerships to take our solutions to the world. However, there will be some redefining of our enterprise business so that the solutions will not typically be in the voice and data format that the mass market customer sees, but will be in domain solutions which the customer will see as tremendous value addition.”
Meanwhile, the company is waiting for the official policy on 3G, an area in which it expects to score better than its rivals. It already has a 3G-ready infrastructure with an assured migration path to 4G and an inbuilt security system, which it is looking to leverage to achieve its stated target of 100 million subscribers by 2011.
Net net, there are all signs that TTSL is a strong contender for the top slot. It has the resources, is a serious player and is working on a strong charter to ensure future growth.
Recent initiatives
