Tata Teleservices, Tata Communications continue to face challenges

In 2011, Ratan Tata handpicked N. Srinath to head Tata Teleservices Ltd (TTSL), the group’s telecom venture that was nearly written off by analysts and rival operators. Two years later, TTSL has still not risen up to the expectations.

Srinath, who replaced Anil Sardana, worked on a three-pronged strategy – cutting costs, redeploying assets from low growth areas to high growth regions and focussing on generating higher revenue from data services.

“For Tata Teleservices, the EBITDA margins are not so good. I think the group has taken some tough decisions like surrendering ‘excess’ CDMA spectrum, footprint reduction and site base optimisation,” said Shobhit Khare, a telecom analyst at Motilal Oswal Securities.

However, the operator had just 63.45 million users as of October against market leader Bharti Airtel Ltd’s over 190 million.

Its two companies — TTSL and the listed Tata Teleservices (Maharashtra) Ltd — lost 96,560 users in October (TRAI data).

The company had not been in the forefront of innovations, even though it was the first to introduce per second billing that led to the price war, said an industry source.

According to an IDFC Securities report, TTSL would also consider a partnership with Norway’s Telenor, and both companies (already having a partnership through Viom Networks) could consider acquiring Aircel.

TATA COMMUNICATIONS

Indisputably, while one of the challenges for Chairman Cyrus Mistry is to turn around TTSL, another is Tata Communications.

In 2002, the group had bought a 45 per cent stake in Tata Comm, then Videsh Sanchar Nigam Ltd.

“Having acquired it from the Government, there are legacy issues that would take some more time to get resolved. The company’s business is highly capital-intensive and competitive,” said Jagannadham Thunuguntla, Head of Research at SMC Global Securities.

For the year ended March 2013, Tata Comm pared its consolidated net loss to about Rs 728 crore from Rs 792 crore a year ago.

It posted a consolidated net profit of Rs 80.36 crore in the quarter ended September 2013, its first quarterly profit since FY 09.

“There has been a resurgence in its financial performance during the past couple of quarters, while it is also in discussions to sell off Neotel (loss-making South African subsidiary), a move that would help in reducing the company’s total debt,” said Khare.

Kamlesh Bhatia, research director at Gartner, concurs: “There is a good future for Tata Comm.

“The company is major in communications infrastructure business.”

rajesh.kurup@thehindu.co.in

(This article was published on December 23, 2013)
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