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TTSL: Thrust on 3G and data services

October 31, 2012
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There is a strong perception in the telecom industry that Tata Teleservices Limited (TTSL), the telecom arm of the Tata Group, has lost some of the aggression it had displayed in 2009-10. At that time, it was adding over 4 million subscribers each month. The company introduced bold tariff plans (pay per call and pay per second) that went on to change industry dynamics. Also, in late 2010, it became the first private operator to launch 3G services in India.


However, after two busy years, there has been a significant slowdown in TTSL’s activity. The most visible evidence of this has been in its subscriber numbers. In the past year, it has lost about 10 million subscribers even as its competitors have registered strong customer growth.

According to the Telecom Regulatory Authority of India (TRAI), TTSL had a user base of 88.55 million as of August 2011, which declined to 78.63 million in August 2012. In comparison, Uninor’s user base grew from 27.73 million to 42.11 million.

In terms of subscriber numbers, TTSL trails far behind Bharti Airtel (186.90 million), Vodafone India (153.35 million), Reliance Communications (134.63 million), Bharat Sanchar Nigam Limited (120.73 million) and Idea Cellular (115.97 million).

Senior company officials claim that the slide in the user base is on account of a major clean-up operation undertaken by TTSL. The company has been removing inactive users from its subscriber base. Since mid-2011, it has been registering user numbers based on visitor location register data, which shows the number of active subscribers on a network.

Also, since early 2011, when N. Srinath joined TTSL as managing director from Tata Communications, the company’s focus has shifted from voice customers to data users. According to company officials, TTSL is now focusing on high-value customers (generating high ARPUs) and not volumes to drive growth. This would also result in customer loss to some extent.

Market position

TTSL is a pan-Indian player offering telecom services across the mobile, wireline, fixed wireless, public booth telephony, long distance and broadband segments. It also provides wireless desktop phones. The company offers its products and services under the TATA DOCOMO brand. Currently, TTSL and its listed subsidiary Tata Teleservices Maharashtra Limited together operate in more than 450,000 towns and villages across the country. It is present across all 22 circles on the CDMA platform and 18 circles on the GSM platform.

TTSL began full-fledged operations in the Indian telecom sector in 2004, after the introduction of the UAS licence regime. Its fixed line operations, though older (since 1996), were limited to a few circles.

Initially, the operator had a low risk appetite and did not take any notable initiatives, which ultimately led to its market share falling.

From 2006, the company started taking steps to revive itself. Over the next few years, it brought to the market several popular and innovative value-added services (VAS) and schemes including the lifetime validity, Non-Stop Mobile and Don’t Stop plans. It invested in brand promotion and tied up with handset manufacturers like ZTE and Huawei to offer handsets priced at about Rs 1,500. It was also one of the first operators to introduce its own range of branded handsets.

Predominantly a CDMA player, TTSL entered into an agreement with Japanese telecom major NTT DOCOMO in November 2008. The latter picked up a 26 per cent stake in the company. This turned out to be a key step in the growth of the company. TTSL obtained a GSM licence after the government allowed operators to offer dual-technology services under a single licence.

In 2009, the company began offering GSM services and soon raced ahead of its rivals with a series of innovative schemes, VAS offerings and tariff packages. In the same year, it merged its fully owned telecom tower subsidiary Wireless TT Info-Services Limited with Quippo Telecom Infrastructure Limited to form Viom Networks, one of the country’s largest independent entities in this space. Currently, Viom has an estimated portfolio of nearly 45,000 towers.

3G services

In late 2010, TTSL became the first private operator to launch 3G services in the country. The company introduced these services simultaneously in all nine circles where it won 3G licences.

Currently, the company is partnering with various organisations to offer several 3G services on mobile devices. Some of these services include smart pilots, which provide turn-by-turn route directions on the user’s mobile through visual and voice assistance; DOCOMICS, a mobile-based comic viewer application; and the Route Finder, which provides directions from the subscriber’s current location to the destination.

New leadership

While Anil Sardana, former MD, TTSL, infused energy into the company and brought it into the limelight, Srinath is expected to steer the company to its next level of growth.

He has been associated with the Tata Group for 20 years, and has played a significant role in transforming Tata Communications (then Videsh Sanchar Nigam Limited) from a domestic monopoly to a leading global telecom vendor. In those years, the company’s business model was restructured and it entered several new business segments, both in India and overseas.

Srinath plans to improve the company’s profitability by optimising costs and revenues through various initiatives including consolidating the management structure. In the past few years, TTSL’s main investments have been directed at expanding networks and increasing its 2G and 3G service capability. Going forward, the company intends to focus on better customer segmentation, offering the best mix of services, reducing the cost-to-market, improving services, investing only in profitable areas and controlling capex.

Given the high competition in the telecom space, analysts, however, feel that these targets are ambitious. “The name of the game is increasing the number of users, and enhancing revenues and market share. In this context, the biggest challenge for TTSL will be to drive growth in a space where competition is stiff and the regulatory environment is uncertain,” says an analyst from KPMG.

Revamp initiatives

Over the past year, TTSL has undertaken two major internal restructuring exercises. In July 2011, the company’s CDMA and GSM divisions were “unified”, which meant that all circles were divided under four regional heads - Vineet Bhatia (West and Upper North), Mahesh Thampi (East and Uttar Pradesh), Yatish Mehrotra (South) and Ajit Chaturvedi (Delhi and Rajasthan). These officials report to Deepak Gulati, executive president, mobility. These four regions have 15 mobility businesses.

In October 2011, TTSL integrated  its service offerings under a single brand – TATA DOCOMO. Before this, the brand was used only for the operator’s GSM-based mobile services. “Our CDMA, GSM, 3G and Photon platforms will now be available under the new unified brand of TATA DOCOMO. This will enable our consumers to upgrade to a world of new possibilities in the voice and data service segments under a single brand. They will no longer have to go through multiple touchpoints for various brands,” said Deepak Gulati, executive president, mobility business at TTSL. This means the phasing out of brands like Tata Indicom, Tata Photon and Walky, the operator’s CDMA, fixed line and internet data card services respectively.

Apart from providing users easy service access, TTSL’s restructuring exercise will help the operator limit its advertisement spends to only TATA DOCOMO. This will improve brand recall and help the company save costs on separate advertisement campaigns.

Of late, with a renewed focus on CDMA, TTSL is planning to extend the scope of its outsourcing pact with ZTE. It is looking to contract the Chinese equipment manufacturer to manage and maintain its 3,500-odd CDMA sites in the eastern region. So far, TTSL has been directly managing its CDMA networks in the eastern circles.

In early 2012, TTSL renewed its contract with ZTE to manage and maintain its GSM networks for three years in the Odisha, West Bengal and Bihar (including Jharkhand) circles.

Analyst view

Backed by the deep pockets and strong brand equity of the Tata Group, TTSL’s key strengths include its first-mover advantage in CDMA, a strong presence across all telecom segments and verticals, and a customer-centric approach.

“TTSL has been the pioneer of the CDMA 1x technology platform in India. The company has managed to establish a strong presence in the market with acquisitions including that of Hughes in Maharashtra. Moreover, TTSL runs the least congested networks in India, which is a plus for consumers,” observes Harish Bijoor, CEO, Harish Bijoor Consults Inc.

“TTSL has carved a niche for itself and has led the industry with innovative service offerings and tariff plans. Also, over the years, the operator has managed to maintain its service quality and levels,” says Dr Mahesh Uppal, director, Comfirst.

However, in early 2012, the Supreme Court cancelled three of TTSL’s licences. This puts the company in a disadvantageous position as compared to its rivals. Also, in spite of having 2G licences, the operator does not have any spectrum in Delhi and 39 other commercially important districts in nine telecom circles. However, TTSL made payments for spectrum four years ago.

Also, customer churn continues to be a major concern for the company. Besides, as per TRAI data, the company’s revenue market share has improved only slightly in the past 12 months. Its share stood at 8.8 per cent in the fourth quarter of 2011-12, a growth of only 0.2 per cent over the same period in the previous year.

TTSL’s underperformance on promised parameters is reportedly straining its relationship with NTT DOCOMO. Under the shareholding agreement, the Japanese mobile operator can acquire a 49 per cent controlling stake in TTSL, if the latter is unable to meet performance benchmarks in terms of revenue targets, profits and subscriber base in a specified time. The foreign partner can undertake this by exercising two call options, in 2012 and 2014.

The company has been focusing on high-ARPU data subscribers. However, as an analyst from Dua Consulting says, “In the current competitive environment, sticking to a data-centric strategy may not be enough for an operator to survive. An equally impressive GSM-based voice strategy is also important, as high-ARPU customers are concentrated in this segment.”

The way ahead

Broadband, 3G and VAS will continue to be the company’s key focus areas. As Gulati says, “We will continue to build the TATA DOCOMO brand and consolidate our GSM arm. We aim to become one of the top three wireless operators in the country.”

3G will be another important service segment. Gulati believes that TTSL can emerge as one of the top two/three 3G players, given that it was the first private player to launch these services and completed network roll-out within two months of receiving spectrum. “Our 3G services were launched successfully and we have not witnessed any problems on our network so far. We had the support of DOCOMO in network roll-out. As a result, our consumers are enjoying a great 3G experience,” he states.

In the broadband space, TTSL has an edge over its peers given its access to Tata Communications’ extensive network.  Going forward, the company will look to improve its broadband market share and expand its product portfolio, which includes devices and modems offering internet connectivity of 3.1 Mbps.

TTSL currently provides the TATA Photon Plus USB modem; the TATA Photon Wi-Fi Hub, which allows up to five users to access the internet simultaneously; the TATA Photon Whiz wireless internet modem, which supports voice calls; and the TATA Photon Max, which offers internet connectivity of up to 6.2 Mbps.

Recently, TATA DOCOMO tied up with Dell to launch a bundled broadband offering. Under this partnership, customers purchasing Dell laptops can avail of a Tata Photon Plus post-paid connection at a discounted price.

To remain competitive and improve its ARPUs, TTSL has also been active on the VAS front. It has not only launched several innovative services, but also formed several strategic partnerships in this segment. For example, it recently joined hands with mCarbon, a VAS player. Under this partnership, mCarbon will provide technology support for TATA DOCOMO’s caller ring back tone service.

TTSL is a long-term player and is making every effort to retain its market position. The company is already leveraging its resources and working on a strong charter to ensure future growth.

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