Shamik Das, CEO, S Tel

The journey before launching operations is very exciting; thereafter, it gets more challenging. Being a new operator, one is subject to much speculation with regard to who is launching services, where, how and when. Therefore, our strategy had been to commence operations as early as possible. We are operating in what we call the growth markets or category A circles, and not C circles, as termed by the Department of Telecommunications. There are a number of opportunities in these circles. For the past three years, the compound annual growth rate in the G circles has been more than 70 per cent. These cities are growing faster than the metro and Category B circles. So, since we have the licence, we thought of launching services rapidly so as to explore the market and exploit the opportunities.

Thereafter, we began to chalk out a differentiating strategy, which is important, considering that in this market consumers are paying Re 0.01 or less per second. Therefore, having the right business model is essential. We decided that we would concentrate on reach, which includes distribution, market and network reach. To sum up, collaboration, partnership, consumers, brands, key processes, key people and distribution will be our forte. We will develop our internal core competence in these areas. Everything else will be outsourced. We aim to have the best value proposition and the best qualitative proposition, and go to the market with that offer. This is not only low cost, it is strategic.

How are you coping with the challenge of being a new entrant in a market full of big players and major brand names?

We believe that one does not require a huge amount of money to run the business. However, capital is needed for starting up, and funds were available to us. We carried out an analysis of financial growth through a consortium of seven banks led by IDBI.

Keeping in mind our business model and the market’s growth potential, we did not have much difficulty in acquiring funds. Our partners have all been supportive. Siva Ventures, one of our partners, had also partnered with  Aircel, which today is a $2 billion group. Batelco from Bahrain is our other partner. So, with our business model based on collaboration and partnership, we felt the time was right to launch services. We tied up with tower vendors like Bharti Infratel, Reliance and Vodafone. The most important benefit we derived was that,  being a late entrant, we could get the positioning of our towers in the manner we wanted. So our network planning took place very efficiently. We launched our services without setting up a single tower and without digging an inch of ground. We have entered into sharing agreements for passive network, transmission as well as network connectivity.

The biggest challenge before the launch was the brand. The Indian consumer typically opts for big brands, which are owned by multinational companies. Given the presence of so many brands in the market, we decided to create a brand that would be different from the rest. We did not want to boast of becoming a major national player; rather, we decided to work to our advantage the fact that we were not a pan-Indian operator. We, therefore, launched a brand that speaks the local language, Aapka Apna Phone The idea was to connect to the locals and address their specific needs. This strategy has worked very well for us.

How has the response been so far?

The response has been very good. We have obtained a substantial user base in all our markets. We have garnered more than 1 million customers within the first 90 days of launch, something that no other operator has achieved in our circles. Also, our initial offerings did well. For example, we launched the bulk minutes product, which received good feedback. Being a new player, we had to do things differently, whether in terms of brand, connectivity, organisation, business model or products and services.

How do you see S Tel vis-a-vis other new players in the market?

There are two or three new players in the market at present. the response of the market is in our favour to some extent. Consumers are choosing S Tel not only for the network, but also for the products we are launching and the services we are providing. Though there is a lot of competition in the market, we believe that there is a sizeable opportunity for all of us to play a fair game.

What is your view on the 3G network and how do you think it will change the market dynamics?

S Tel is the only new operator to have won licences in the 3G auctions. We were able to win 3G licences for all three circles of operations. This was in line with our long-term mission of becoming one of the top five operators in the markets we operate in by 2015. We intend to be a long-term player, and so it is vital to ensure that we have everything that is required to cater to our customer’s needs.

Today, voice has become a commodity with everybody using it through one mode or the other. Also, the uptake of data services has been increasing rapidly. A couple of years ago, people were content to have internet connectivity of 56 kbps. Today, everybody wants speeds of around 1 Mbps. Voice is a basic requirement, but what is growing at a much faster rate is the use of gaming, entertainment and commercial applications. For all these applications, one requires data connectivity. Today, people feel disconnected with the rest of the world if they do not have access to the internet. The internet has become a commodity like the TV or refrigerator or any other household item. Therefore, high speed broadband connectivity has become a necessity. We need to fulfil this demand. I believe that from the market’s point of view, it will take some time for this demand to grow, but this is what the consumers are looking for. People will also select operators who can provide high speed data connectivity.

Do you find it a challenge that most of the customers in the circles you operate in are low-end users?

With ARPUs at Rs 100 or Rs 150, are there any high-end subscribers in India anymore? The volumes are also more towards the middle and the lower end. In other countries, 3G is an expensive proposition. In fact, even mobile phones are an expensive proposition in some European countries, where fewer people use them. However, in India, mobile phones have become a very low-cost item, cheaper than many household items. Regarding data applications, the basic requirement is getting high speed internet connectivity, which would not be very expensive for the people to begin with. People connect with the rest of the world through email and social networking, and the uptake of these applications has been growing at an exponential rate. As India is a volume-based market, I do not think the cost of 3G connectivity will be very high. On an average, people should be able to afford it. Handset prices are also falling. The desktop or laptop is still an expensive gadget but the mobile phone is much cheaper and 3G technology will help bridge the digital divide.

What kind of tariffs are you expecting in the beginning?

It is too early to comment on that as we expect spectrum to be available around September or October this year.

When are you hoping to break even?

We are expecting operating profits by the third or fourth year of operation, that is, by 2013-14.

 What are your investment plans?

The base plan is for about Rs 20 billion, which is fully tied up. We also have an additional plan worth Rs 7 billion for 3G. We will be rolling out this plan shortly. We have already rolled out our 2G plan in Himachal Pradesh, Orissa, Bihar and Jharkhand, Assam and the Northeast. We will next launch our services in Jammu & Kashmir, but are still waiting for spectrum in certain locations.

What trends do you foresee in the sector?

We may see some mergers and consolidation after a year, because 9-10 operators working efficiently and profitably in the same location is unheard of in other telecom markets.

There would be spectrum management and spectrum-related consolidation for both 2G and 3G spectrum. Technologically, it’s going to be one of the most exciting years for telecom with 3G and BWA spectrum rollout. We should also see mobile number portability (MNP) coming in soon.

What positives are you looking at from the launch of MNP?

We will have to see how MNP goes, because the Indian market functions differently and does not follow any of the trends prevalent in the European countries.

Today, there is a multi-SIM scenario in India, and people tend to buy different SIM cards for different applications. So there will be people who will want to switch to a better operator without changing the number they have been using for the past 8-10 years. What will determine the success of MNP is how cumbersome or efficient the process of shifting and changing operators will be for customers

What is your wish-list on the regulatory front?

We believe that the entire telecom policy should change and the government should formulate a new telecom policy. It had last chalked out a telecom policy in 1999, which had paved the way both for the growth of the industry and the country, and had significantly contributed to changing the quality of life in India. However, in these fast changing times, the policy has become somewhat obsolete. There are multiple service providers in 2G and there is a requirement for additional spectrum. There has also been a change in the technology for broadband and 3G spectrum.

So, the government should evolve a new-age spectrum management policy and focus on telecom-related applications that would actually improve the lifestyle and economic condition of the people. For example, m-commerce could take banking to the rural people’s doorstep, which may not be possible otherwise.