|S. Ramakrishnan, Managing Director, Tata
august 15, roughly a year after it bagged the licence for the Gujarat
circle, Tata Teleservices Ltd (TTL)-the basic telecom services provider
that has licences for six circles-will flag off a pilot run of its
wireless and wireline services. If all goes well, in exactly a month
from Independence Day, TTL Gujarat will kick off Phase I of commercial
operations in the key cities of Ahmedabad, Baroda, Surat and Rajkot.
The array of services on offer will include limited mobility, fixed
wireless telephones, fixed wireless telephone booths using smart-card
technology, and the promise of higher data speeds, up to 144 kbps,
10 times more than what users are accustomed to today.
But the readiness for rollout is not the only
reason for the charged atmosphere at Gujarat Bhavan, the TTL headquarters
in the heart of Ahmedabad's commercial hub that houses 300 spirited
employees whose average age couldn't be too many days over 30. As
the team headed by Chief Operating Officer Jagrut Vyas works frenetically
at lifting the blueprint off the drawing board onto a subscriber
base that's estimated to be 30 lakh-strong (that's just the current
base of fixed line users) and growing at 19 per cent annually, there's
one burning impetus to meet the September deadline. TTL Gujarat
would have pipped Reliance at the post in the rollout race.
Indeed, both the Tatas and the Ambanis are
stepping on the gas in the Gujarat circle, and both have made fair
progress (although TTL officials love to point out that the Ambanis
had got the Gujarat licence six years before they did, in 1995).
For instance, TTL has put up some 26 cell sites (needed to provide
seamless mobility with land-line-like clarity) in Ahmedabad, 12
in Baroda and 18 are planned for Surat; Reliance too say industry
watchers has made similar progress. In terms of a backbone to provide
wireline services (video-conferencing, isdn, DSL, VPNs, etc), the
Tatas will lay close to 2,000 km of pipes in the state, whilst the
Ambanis could go up to 3,000 km. TTL has covered close to 500 km,
and company officials concede that the Ambanis are ahead in this
race. But it isn't known whether Reliance has installed switches,
which are crucial to commence operations. TTL has its switches in
place at Ahmedabad, Surat, and Rajkot.
|N. SRINATH/ DIRECTOR (OPERATIONS)/ VSNL
Formerly a part of the Tata Tele top brass, Srinath's mandate
is to create a 5,000 km long backbone from Punjab To Ernakulam,
which will then be used to provide network-based and data-centric
services, including national long distance, and data centres.
If the Tatas are able to commence Gujarat operations
before the Ambanis -- renowned for their project execution skills-it
will spur TTL in the other basic services circles, into which Rs
8,250 crore is being pumped, to step on the gas. For instance, in
Delhi too the Tatas and the Ambanis are pitted against each other,
with TTL targeting the third quarter for launch. The Andhra circle,
where as of end-May TTL had garnered 1.7 lakh subscribers, begins
its third year of operations, and in Maharashtra (including Mumbai
and Goa), by acquiring Hughes Tele, TTL is for all purposes up and
running, with instant access to 8,000 buildings in Mumbai's financial
district (which Hughes has wired up). And in the remaining two circles,
Tamil Nadu and Karnataka, TTL is targeting a launch-date in the
The new-found speed and aggression at the House
of Tatas isn't confined to just basic services. From his first floor
office at the Lokmanya Videsh Sanchar Bhavan in central Mumbai,
N Srinath, Director (Operations), VSNL, declares that he's slashed
international long-distance (ILD) rates, which account for 87 per
cent of the recently-privatised telecom major, by 40 per cent to
match the competition (from Bharti). Realising that the recently-acquired
telecom major has to find new growth avenues fast, he's set to roll
out national long-distance (NLD) services by end-July-a market estimated
at Rs 6,000 crore-with VSNL's existing ILD switches. And by December,
once a chunk of VSNL's national backbone is laid (the Tatas have
transferred the installation of the national backbone to VSNL post-acquisition),
along with full-fledged NLD services Srinath will also flag off
IP telephony services. "Once the Tatas bought VSNL plenty was
expected in terms of price cuts and bundling of services, but they
now seem to be getting more active," says Kobita Desai, Senior
Analyst (Telecom), Gartner India.
In terms of sheer scale, there aren't too many
who can boast the kind of ambitions being nursed by India's No.
2 business house. Indeed, in terms of grandeur it can only be matched
by India's No. 1 business house, the Reliance group. Reliance Infocom
will be spending close to Rs 25,000 crore over five years on its
infocom blueprint, a fair bit of which will go into wiring 115 cities.
The Tatas have lined up Rs 14,000 crore over five years to provide
nationwide end-to-end telecom solutions, which includes laying a
5,000-km backbone between Punjab and Ernakulam in Kerala.
THE VSNL EDGE
gateways, 12 switches
» 47 earth stations
with 85 carriers in 75 countries
» Founder signatories
of six submarine cable systems terminating in India
» Over 3 gigabits
of operational international bandwidth for voice and data
» Over 2.5 gigabits
of operational domestic bandwidth for voice and data
» A 6 lakh-strong
Internet subscriber base
» 130 years in the
To be sure, as far as integration goes, the
Tatas could lay claim to having the most focused footprint, addressing
70 per cent of the country's voice and data traffic, covering both
access and transport, and being best placed to offer a bouquet of
services. Along with VSNL and its cellular joint venture idea, the
Tatas can provide international bandwidth, ILD and NLD, basic and
cellular services, and Internet and value-added services. What's
more, it also in a better state of preparedness across the spectrum.
The VSNL acquisition has given it access to international bandwidth,
ILD, NLD (for which VSNL has a licence), idea Cellular has a significant
presence in the mobile space, and the basic services bandwagon is
beginning to pick up pace.
"Our offering will address both voice
and data, service and backbone, corporate and individuals, wholesale
and retail, front-end and backend services. This will ensure that
we address/deliver to each and every segment/requirement of the
market," explains S. Ramakrishnan, Managing Director, Tata
Plenty On The Plate
Whilst Gujarat, Maharashtra, Tamil Nadu, Karnataka,
Delhi, and Andhra are the six circles in the spotlight today-TTL
aims to rope in 3.8 million subscribers for its basic services from
these circles by 2007-the Tatas are also considering venturing into
Punjab, Haryana and Kerala. For now, though, TTL has plenty on its
plate, with the two biggest challenges being successfully implementing
the concept of limited mobility (subject to court and government
approvals) and the CDMA-based fixed wireless services.
ISDN: Allows audio,
video and text to be transmitted simultaneously via end-to-end
digital connectivity; high-quality digital video conferencing
Point-to-point dedicated pipes connecting two leased circuits;
high-speed transfer of data, voice and images
Digital connectivity and flexibility of bandwidth on demand.
OTHER DATA PRODUCTS: Internet
access, virtual private networks, data centre, disaster recovery,
security solutions, network management, network security consultancy
can access group members via 3-4 digit dialing
Enables utilisation of facilities traditionally provided through
a PBX on a Tata Tele exchange
FIXED WIRELESS: Provides
LIMITED MOBILITY (TATA MOBITEL):
3G 1 X CDMA technology, capable of delivering seamless coverage,
crystal-clear voice and high-speed data; no airtime charge;
Rs 1.20 per local call for 3 minutes; Make or receive local,
STD or ISD calls
PUBLIC TELEPHONE BOOTHS (TATA TELESMART):
Smart-card technology-based phones; tamper-proof billing systems
WHAT COULD GO WRONG
courts rule that basic service operators can't provide limited
mobility. Do the Tatas have a Plan B?
demand from corporates for data products and services (VPNs,
video-conferencing, etc.,) doesn't take off. Will the investment
in the national backbone be viable?
ILD rates falling rapidly and VSNL losing its monopoly, can
the Tatas find fresh growth avenues fast?
is a growth avenue, but is there room for three players-the
Tatas, Reliance and Bharti?
As coo Vyas puts it, the advantage of the 3G
1X CDMA-based limited mobility service being provided by TTL is
"landline voice quality but mobile and capable of high-speed
data speeds." Dubbed Tata Mobitel, the advantages of the service
is that there are no air-time charges, a three-minute local call
costs just Rs 1.20 and it allows for making and receiving std and
ISD calls whilst mobile. "Also, since incoming calls are free,
and there's no fear of huge bills, there will always be a market
for these services," adds Sanjeev Garg, General Manager (Marketing)
As for the technology, CDMA-which basically
is one method of multiplying bandwidth just as GSM is another-is
no more an unproven technology. Some 26 per cent of the world's
networks is CDMA-based and the global subscriber base has crossed
100 million, with a higher density in the US and Korea. It has its
benefits, which include low power requirements, extended reach (which
is beneficial to users in outer-lying areas), smaller phones, possibility
of simultaneous conversations, a clear developmental path to 3g
networks and increased efficiency (which means that the carrier
can serve more subscribers).
TTL officials will tell you that they were
the first to offer CDMA-based fixed wireless connections in India,
in Andhra. And it is this experience that's given the Tatas the
confidence to move at breakneck speed in the other five circles.
After some initial hiccups (courtesy a high licence fee and a bar
on migration of subscribers), TTL is well on its way in AP, covering
10 cities, and adding at least 10,000 subscribers per month. A 1,200-km
backbone has been created in the state, and the company is offering,
besides mobility, post-paid Internet services, smart card-based
mobile public telephones and public telephone booths (branded Tata
Telesmart). TTL has already installed some 3,900 pay telephone booths
in that state. The subscriber target for the current year is a total
of 3 lakh.
Clearly the Tata gameplan is to capture early
share via speedy rollouts, and in the process the group isn't averse
to taking risks. For instance, there's still no 100 per cent clarity
on the limited mobility vs cellular issue. If the Supreme Court
does decide in favour of the cellular operators, the Tatas will
have to roll back their services in AP and move on to Plan B in
all its circles. They better have a Plan B in store.
Then there's also the reality that the Tatas
will be eating into their own subscriber base, once subscribers
of idea Cellular begin moving on to Tata Mobitel services-after
all, TTL is expecting to gain from a churn in the mobile space.
Ramakrishnan explains that the two services don't clash head-on.
But he agrees that "a third of the mobile market could go either
way". There's no reason why limited mobility and cellular services
can't exist side by side, but the uncomfortable part for the Tatas
is that their cellular operations is a joint venture in which the
other partners have nothing to do with basic services.
|KISHORE CHAUKAR/ MD/ TATA INDUSTRIES
Chaukar has been responsible for putting together the Tatas'
integrated telecom blueprint, which gives the group a presence
at every point of the services spectrum
The Challenges Ahead
Another challenge for the Tatas is to find
fresh growth pastures for VSNL. "VSNL will not be able to entirely
cover the loss of its ILD monopoly," says Gartner's Desai,
although she does point out that the advantage for VSNL is that
its subscriber acquisition and retention costs will always be lower
than the competition's. By getting VSNL to invest Rs 1,200 crore
in Tata Tele for a 26 per cent stake, the Tatas have ensured that
the former PSU has more options. Yet, it will be the NLD business
that could prove crucial for VSNL, given that it will be competing
with Reliance and Bharti. Also, VSNL now has the mandate of laying
the nationwide telecom backbone, and concerns amongst analysts include
whether there will be enough demand to justify the investments being
made in pipes, and whether there could be a glut with VSNL, Reliance
and Bharti laying so many thousands of kilometres of fibre.
But then again, telecom is all about risk.
And speed. Gestation periods are long, and that's why quick roll-outs
could well mark the difference between the quick and the comatose.
TTL appears to have it all figured out: operating costs before interest
should be covered in the second year; after interest in the fourth;
after depreciation in the sixth; and net profits by the eighth.
But projections mean nothing till they're met, as the Tatas have
realised in Andhra, where they've fallen behind by a year thanks
to the high licence fees and a delay in migration of subscribers.
The good news, though, is because of the early start, the AP circle
is today showing operating profits (before interest, depreciation,
Other than being a high-risk business, telecom
also guzzles cash-the Tatas have still to make investments of another
Rs 10,000 crore (Rs 5,000 crore has already been spent). Ramakrishnan
rules out an ipo before the fourth or fifth year. A private placement,
though, is on the cards. With over Rs 1,000 crore being sunk into
each circle, the Tatas need the money. And the progress made in
Andhra should be enough to convince investors to loosen the purse