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Updated: June 10, 2012 21:44 IST

Talking Business: Lot of headroom for growth

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N. Srinath: A lot depends on pricing for spectrum Photo: Shashi Ashiwal
N. Srinath: A lot depends on pricing for spectrum Photo: Shashi Ashiwal

The auction process should throw up the true value of spectrum, says Tata Teleservices MD

After seeing heady days in the late 1990s and flourishing for almost a decade, the Indian mobile telecommunications sector ran into trouble with the unravelling of the ‘telecom scam' in 2008. Ever since, it has been plagued by one issue or another. Today, the industry is at the crossroads with the government, on the one hand, keen on auctioning new spectrum and ‘refarming' some existing spectrum and, on the other, intensifying of intra-industry competition to extend reach and penetration. Recently, N. Srinath, Managing Director, Tata Teleservices, a national telecom player, spoke to Ramnath Subbu on issues confronting the industry and the road ahead. Excerpts:

The Indian mobile telecom industry has been through turbulent times in the last few years and several contentious issues persist. What are the immediate prospects?

We must put things in context. The Indian mobile telecom sector was universally accepted as one of the success stories of what successive governments were able to achieve.

From 1999, the industry saw a huge fall in tariffs leading to massive growth in penetration. Driving this was the theme of strong competition — every time it increased, there was a corresponding drop in tariffs and acceleration in subscriber acquisition.

In 2008, several new operators came in and the tariffs halved. Between 1997 and 2008, 260 million subscribers were added while between 2008 and 2010, another 320 million came in. India, today, has around 600 million subscribers and there is an equally large market waiting to be tapped.

The industry had promised certain services on the basis of expected connectivity to customers. Unfortunately, the delivery of bandwidth was not enough to support those services. There is a lot of headroom to bring in new customers and services but for that to happen, underlying enablers have to be in place.

There has been a clamour for a ‘level playing field' but with older and newer players coexisting, each with their distinct advantages, is that not difficult?

Creating a ‘level playing field' to me means cleaning up the Spectrum issue. Either make the 900 Mhz spectrum available to everyone or stop creating competition. We are still awaiting spectrum allocation in Delhi and 39 districts across nine circles since 2008 for our GSM services. The government now has an opportunity to get it right and refarming of spectrum is the right step. A sensible balance between key stakeholders must be reached.

The consumer must have services at a price he can afford. Second, being highly capital-intensive, there must be clarity and stability in government policy.

Operators have invested huge sums and there is a 6-7 year gestation period, but if the policy changes, lenders and investors lose confidence. Third, the auction process should throw up the true value of spectrum that allows operators an opportunity to compete and provide services at a sensible price.

The industry is characterised by rapidly changing technology amidst increasing competition. Are the differentiators of success also changing?

There are multiple things. In this industry, you have to hit a base level of all parameters — brand, distribution, value proposition in terms of tariffs and price, quality of network, quality of customer service and quality of billing and collection.

Every one of these has to cross a threshold and if any of them falls below the threshold, it becomes a ‘dissatisfier' and the customer walks out.

All players have crossed the threshold and now it is a question of managing your marketing mix geography by geography.

We are seeing that circle-wise penetration has followed some pattern but customer behaviour across circles tends to vary — some markets are very price-sensitive, some are deal-cutters and some are value-hungry.

We have stopped chasing customers and rather chase revenue but that does not imply that we are only focussed on metros.

We need mass market numbers to give the scale of operations.

The cream comes from high ARPU (average revenue per user) customers and value-added services. Tomorrow, it will come from new applications and services and that is the way to build up margins in the business.

Japan's NTT Docomo holds 26 per cent in TTL and you undertook a re-branding exercise last year. Where is the tie-up headed?

We tied up with them in 2008 and the contours of the venture remain unchanged. Under the agreement, they have the opportunity to increase stake at different milestones but those have not come up yet. We had so many brands — Tata Indicom, Tata Docomo, Tata Photon, Tata Walky and Virgin Mobile India — in the same space. The whole story of integration of brands was to increase brand awareness and bring brand clarity. For that, Tata Docomo was clearly the brand we would lead with.

What is the road ahead for TTL given that there are so many factors that have a bearing on the prospects?

A lot depends on how the pricing for spectrum comes through. There is, after all, a trade-off between spectrum and capital expenditure. We can support 40-50 million subscribers on 4.4 Mhz band only up to a point. Increasing base stations thereafter affects quality.

When the spectrum auction happens, depending on the reserve price and what is available, we will take a call on whether to participate or not.

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It all reads very well. As a customer of Tata Teleservices I can say that they are not
making optimum use of their CDMA technology. Their GSM network quality is
pathetic - even in the centre of Chennai often there is no signal, voice breaks and
call drops are frequent (I'm talking about T Nagar and Spencer Plaza). Or try
standing right under those monstrous hoardings loudly proclaiming "Our Network
Follows you everywhere " Then there is the turf war between the GSM and CDMA
groups and the customer is often caught in the cross fire ! Unless they improve
the quality of signals and quality of customer service, it will be difficult to hold on
to high ARPU customers, let alone grow revenue from that segment. The onky
saving grace is a a team of committed and loyal managers.

from:  K Srinivasamurthy
Posted on: Jun 11, 2012 at 10:30 IST
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