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SSTL: Focus on brand management and data revenues

December 18, 2014
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After going through tough times since the cancellation of its licences in 2012, Sistema Shyam TeleServices Limited (SSTL) has been successful in consolidating its business since early 2014, mainly on account of its data and broadband business. With the aim of realising revenues and breaking even, SSTL has been focusing on innovations in the data segment.

Keen to pave the way for its Russia-based parent company, Sistema JSFC, to buy out the Indian partner, Shyam Telecom, and to help raise funds for its expansion, the operator had, in May 2014, proposed to extend the 73.95 per cent foreign direct investment (FDI) limit to 100 per cent. However, in October, the Indian government rejected the proposal to increase the foreign stake in the company. The decision was a major setback for the operator as it put a question mark on the flexibility of the foreign parent company to bring equity into its Indian operations.

Despite this reversal, the company has been doing good business in India with the surge in data demand along with an improvement in services. It recently upgraded to social customer relationship management tools as a key business strategy for providing personalised offerings to subscribers. It is now moving forward with a greater focus on brand management and efficient customer care services.

Another recent development has been the issuing of a national long distance (NLD) licence by the Department of Telecommunications, enabling the operator to offer domestic long distance calls on its own network. The licence is effective from September 3, 2014 and has a validity of 20 years. Earlier, SSTL had been providing NLD services using Tata Teleservices’ network. With the licence, the operator will be allowed to reduce its NLD charges while also minimising interconnect user charges.

Riding on data revenues

Given the company’s improved financial performance on account of the growth in non-voice revenues and market acceptance of its 3G-plus network, SSTL reported a reduction in its net loss, from Rs 8.44 billion for the quarter ended June 2013 to

Rs 4.02 billion for the quarter ended June 2014. During the period under review, the contribution from non-voice revenues increased from 34.4 per cent to 38.6 per cent of total revenues, which, according to the company, is the highest in the industry.

SSTL’s data card subscriber base also increased to 1.4 million by end-June 2014. On account of the increase in data usage, the blended mobile ARPU increased from Rs 89 for the period April-June 2013 to Rs 115 for April-June 2014.

SSTL has introduced various affordable and customised data services for its customers keeping in mind the priority of driving data revenue growth. In September 2014, the company launched MTS Movies in partnership with Shotz7 to provide free movies to MTS data and smartphone customers. It also slashed the prices of its MBlaze Ultra Wi-Fi dongles by as much as 33 per cent and introduced a range of monthly usage plans keeping in mind the needs of customers across various categories. For example, SSTL’s post-paid customers can now opt for a 40 GB data pack for Rs 999, 14 GB for Rs 700 and 10 GB for Rs 550. Data plans for prepaid users include 3 GB for Rs 399, 5 GB for Rs 499, 7 GB for Rs 699 and 20 GB for Rs 999. All these schemes have a validity of 30 days.

The business strategies of the company show that it is betting big on data services. In this regard, SSTL has upgraded its IT infrastructure to cope with the voice and data surge. It has implemented Oracle Exadata to bring more efficiency into its customer care services and business performance indicators.

In order to attract voice customers, the company has taken initiatives like “Offer Ka Sikander” to provide free talktime with the purchase of new SIM cards. As per the offer, customers get full talktime on all recharges starting from Rs 30, and 10 cent extra talktime on recharges of Rs 150 and above, for a period of one year starting June 2014.

Challenges and the road ahead

In the near future, SSTL will focus on innovations in the data segment, for instance, the introduction of smart home solutions including Wi-Fi-based broadband devices and video surveillance systems for housing projects. The company had earlier launched a smartphone for

Rs 10,999 with a bundled MTS connection with 97 GB of free data usage. It is now planning to introduce an online multiplayer gaming platform in the country to increase its brand equity among the younger demographic and drive up non-voice revenues.

However, adequate spectrum availability remains a key challenge for the expansion of data services in the country. The company must ensure new tower installations to improve the quality of service. It also needs capital infusion for participating in the next round of auctions. With the closure of the parent company’s FDI route, however, it is still questionable how far SSTL can reach in terms of infrastructure up scaling to support the increase in the data customer base and coverage area.

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