While analysts and rival operators have written off Tata Teleservices to doom, company’s Managing Director N. Srinath is working on an aggressive three-pronged game plan to change things around in the highly competitive telecom business.
The strategy revolves around cutting costs, redeploying assets from low growth areas to high growth regions and focus on generating higher revenues from data services.
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Biggest challenge
The biggest challenge for the company is the lack of adequate spectrum. For example, in Rajasthan, it has spectrum only in 60 per cent of the geography while the balance is yet to be allocated by the Government. Running a network in these areas using spectrum allocated to other players drives up costs.
“We cannot be the most aggressive player in the market so why fight a battle which you cannot win today. But we will come back to fight the battle when we get the spectrum,” he said. According to Srinath, the company could be in the race for 900 MHz spectrum in the upcoming spectrum if pricing is right.
“900 MHz spectrum will give us better cost efficiency, which the incumbent operators have enjoyed for all these years,” said Srinath.
This additional spectrum is important to the company as it is planning to go aggressive on data services.
To start with, Tata Tele is pushing 3G services on the spectrum it won in 2010 to cater to the growing smartphones users. Until now, Tata Teleservices was building out is CDMA-based network for data services through dongles. However, with the declining usage of laptops and PCs, the company sees better opportunity on 3G smartphone ecosystem.
New areas
Tata Tele is also venturing into new areas such as home surveillance, smart tracking solutions and other machine- to-machine services. M-Commerce is another area and the company has already started money remittance service in 12 cities “While gross additions of subscribers still remain a priority area, organization is focused on revenue enhancement,” Srinath said.
For Tata Tele, it is important that this strategy pays off. The company has seen decline in voice customers on its CDMA network over the last year. Even on the data services, the company has been subsidising the CDMA devices, which has added to company’s financial woes.
“CDMA is a superior technology but the declining ecosystem and device subsidy makes it difficult to sustain profits. If we had not taken the GSM spectrum in 2008, Tata Teleservices would have been in deep trouble today,” said Srinath.
Despite the burden of servicing over Rs 20,000-crore debt, Srinath pointed out that the company is fourth in the market in terms of revenue. “GSM business for TTL has shown a steady growth month on month and has been very encouraging. The percentage of active users on our network has grown from below 40 per cent to close to 70 per cent over the past 18 months,” he says.
The big test for Tata Teleservices would come at the end of fiscal 2013-14 when its Japanese partner DoCoMo has the option to exit the venture. There is speculation that the Japanese firm may exit the venture and some other foreign player such as Sistema or Telenor may buy out the company.
DoCoMo's President Kaoru Kato, in an interview to Wall Street Journal, said on Wednesday it has no plans to sell any part of its Tata stake.
While Srinath said that it was too premature to comment on the specifics of any possible deals, he added that there is a lot of clarity required in the mergers and acquisition rules before any consolidation can happen in the industry.