HANDS ON? Group Chairman Ratan Tata says he will be actively involved in the telecom business now; coincidentally, Tata Tele finally seems to be getting its act together

On April 11, Ratan Tata stepped down as the Chairman of Videsh Sanchar Nigam Limited (VSNL), an erstwhile public sector undertaking that the Tata Group had taken control of in 2002. The reason proffered was that Tata would need more time to look after the group's "expanding activities in India and overseas", and his additional responsibilities "in connection with the Investment Commission", a government-created body of which he is the Chairman. The real reason is hidden in a rider that goes: "He would continue to be involved with the co-ordination and integration of the Tata Group's strategies and activities in the telecom space."

The message between the lines: Tata will now try and push the group's foray in the telecom business, trying to integrate its various offerings into one saleable proposition. His timing couldn't have been better: 2005, after all, is when Tata Teleservices (TTSL), the group's flagship telco, looks to be getting its act together. Not too long ago, TTSL was a provider of fixed telephony services in Andhra Pradesh and Maharashtra. As recently as a year ago, it boasted operations in eight circles and 49 cities (India is divided into 23 telecom circles). Today, it boasts a presence in 20 circles, 1,200 cities and offers a clutch of services: fixed, mobile and broadband. From a little less than two million a year ago, TTSL's subscriber base has doubled to close to four million, and most of the addition has come in the last eight to nine months.

In a year when most of India's telcos were busy consolidating their operations, TTSL has grown to emerge the country's sixth-largest telco (in terms of number of subscribers). "Earlier, we were confined to a small geography," says Ajay Pandey, President (Operations), TTSL, "but a lot of things have happened in network-rollout and distribution ever since." On the distribution front, for instance, the company has added some 1,000 True Value Shops, which are exclusive Tata Indicom (the integrated service brand) outlets, in the last four months alone. Pandey claims the coverage will expand to some 2,500 towns, double the current reach, to net an additional six to seven million subscribers over the next 12 months. That will entail an investment of Rs 4,000 crore over the next year, on top of an identical amount that the company spent over the past year. Clearly, the Tata juggernaut is rolling.

The Game Changer

So what has changed at Tata, which until a year ago looked like it had missed the telecom bus, opting to watch the most happening market in India boom from the sidelines? First, it would seem that the group has finally decided which technology to back. The Tata Group has a 24.7 per cent stake in Idea, a company providing mobile telephony services on the GSM platform that operates in eight circles and boasts five million subscribers. Ironically, the Tata Group was also the country's first to offer CDMA-based fixed-but-wireless services as long back as 1996. Unlike Reliance Infocomm, however, which drove India's telecom policy and the market, both, garnering some 10 million subscribers in two years (2003 and 2004), the Tata Group preferred to play a waiting game. Thus, while Bharti Tele-Ventures and Hutch went the GSM way, and Reliance the CDMA one, Tata chose to have both irons in the fire. And by the time the Government came up with its unified licence regime (November, 2003), and the Tata Group decided to back CDMA, it looked much too late. After all, barring one rare moment of aggression, when TTSL acquired Hughes Tele in Maharashtra (2002), the Tata Group had done nothing of note.

POWER CEO: Tata Power's Firdose Vandrevala also has to champion the group's efforts in another happening sector, telecom

That (a situation replete with strategic inertia) is one way of looking at it. TTSL's Pandey, obviously, doesn't share that point of view. He denies that the group was a slow starter in telecom and insists it was merely waiting for some clarity in the regulatory regime. "We wanted all regulations-such as CDMA, limited mobility and the unified licensing issues-to stabilise," he says. Sure enough, it has only been after this (late 2003) that the group had rewritten its telecom foray.

The Rollout

It is evident that TTSL has gone about its growth clinically. "For the first time in the lifecycle of the organisation, we set up a Programme Management Office (PMO) with a mandate to use up the existing capacity and also to go in for expansion," explains Pandey, who heads the PMO. Project Sunshine, conceived to take operations from eight circles to 20 by March 2005, was completed on time. These 20 circles currently account for 96 per cent of telecom revenues in the country (the only circles left out are the North-East, Andamans, and Jammu & Kashmir). TTSL's coverage of 1,200 towns is comparable to that of key rivals Reliance Infocomm (1,700) and Bharti Tele-Ventures (2,300). "The business is like that," says S.C. Khanna, Secretary General, Association of Unified Telecom Service Providers of India. "Whoever goes to the larger number of towns will gain." TTSL has plans to double its town coverage in the current year, although its competitors like Reliance (its stated intention is to reach 5,700 towns by the end of the year), Bharti (5,000) and most importantly Bharat Sanchar Nigam Limited or BSNL (its pan-India rollout is on its way) will increase their reach too.

TTSL's efforts to expand reach have also been accompanied by an aggressive rollout of products. In mid-2004, it launched True Paid, a pre-paid service where customers were not charged any administrative or rental charge (thus, a customer buying a card worth Rs 300 would be entailed to talk-time worth Rs 300, unlike pre-paid offerings of other companies). True Paid also offered its service on the basis of a per-second pulse as against the existing norm of 30 or 60 seconds (thus, a True Paid customer who spoke for 32 seconds would be charged only for 32 seconds; others would charge her for 60 seconds). Then, the company launched Walky, a fixed wireless service that became an instant hit with the consumers, although it is currently under fire from the Telecom Regulatory Authority of India (as are similar offerings from Mahanagar Telephone Nigam Limited, MTNL, and Reliance; the reason is that calls from fixed telephones fall under a different Access Deficit Charge slab, and while these companies treat the service as fixed for accounting purposes, the services provided are 'mobile'). Soon after, TTSL also launched its pay-telephone outlets; some 125,000 of them dot the landscape across the country today.

RELIANCE'S WRONG CALL

RIL Chairman M. Ambani: Losing ground This correspondent met two top officials from the CDMA group (a global body of 110 member companies that use the technology) recently. The duo waxed eloquent about Tata Teleservices, today, a happening company, and an underdog till just the other day. Ironically, TTSL has become aggressive around the time Reliance Infocomm appears to be faltering, caught in a messy play for control between the brothers Ambani who run the Reliance empire. Only a few months ago, Reliance Infocomm announced that its coverage would soon reach 5,700 towns, 400,000 villages and 65 crore Indians. With the brothers headed for a split and a lack of clarity on who will end up with the telecom business, however, the company is definitely not as focussed on business as it should be. The most recent setback was when last month it struck off about a million subscribers from its rolls. Inadequate documentation was the reason proffered, although 'bad debt' or 'defaulters' may be a better way of putting that.

Ready To Play

The simple point is this: TTSL has become aggressive in terms of reach and service offerings; it is not hesitant to be a price warrior (its True Paid vouchers are as cheap as can get); nor does it shy away from courting controversy (the Walky episode). It has also learnt the tricks of the trade by bundling its services with cheap handsets, with a bundled offering available for as little as Rs 1,500. "Now they have a matching strategy in terms of rollout, coverage, services and handsets," says a telecom analyst. "This business is like land-grabbing. All you need is the coverage, the services at the right price points, and availability of quality and cheap handsets." Simultaneously, TTSL has also embarked on a nationwide marketing campaign (it has roped in Sourav Ganguly and Irfan Pathan as brand ambassadors; both, unfortunately, are no longer in the Indian ODI squad as this article goes to press). "Our idea is to have a 20 per cent share of voice in mass media, and we have earmarked a marketing budget of 6-10 per cent of revenues," says Harish Bhatt, President (Marketing), TTSL. He adds that TTSL is poised to garner a 25 per cent share of the country's 180-220 million mobile subscribers by 2010. Analysts and competitors don't dispute this yet.

Competitors have already taken the Tatas seriously, and count it among the five or six pan-India operators that will stay in the business. However, the GSM industry's grouse is that CDMA players like Tata and Reliance gain market share by "giving handset subsidies and predatory tariffs". "We are not in the handsets business. We are in the services business," grumbles Manoj Kohli, President (Mobility), Bharti Tele-Ventures.

Still, for the Tatas, who entered the telecom business way back in the early 1990s, it seems the second coming is as strong as it can get.