Venkatachari Jagannathan

Tata Teleservices launched its much-awaited telecommunications services in Tamil Nadu on a rainy Saturday in Chennai. But the weather could not dampen its debut in a market that promises to further the company’s pan-India ambitions.

Tata Teleservices backed up the September 9, 2002, launch by unveiling a new national brand, Tata Indicom, and a mascot. On November 12, 2002, the company started operations in Bangalore, the first stop in its plans to spread wings in Karnataka. The new brand is significant for the Rs 150-crore company, which has until now been operating only in Andhra Pradesh. Following its entry into Tamil Nadu and Karnataka, Tata Teleservices plans to move into Delhi and Gujarat.

The company is investing heavily in the telecom sector. "The total investment that is planned is Rs 7,533 crore, of which Rs 4,500 crore will be in the form of equity and the balance debt," says Tata Teleservices managing director S. Ramakrishnan. Tata Teleservices’ outlay in these new states is substantial: Rs 1,182 crore in Tamil Nadu, Rs 1,017 crore in Karnataka, Rs 937 crore in Delhi and Rs 1,071 crore in Gujarat. The company is also considering entering Kerala, Punjab and Haryana at a later stage.

Tata Teleservices has been expanding through acquisitions. The company has bought a 50.83 stake per cent in Hughes Telecom (India), the basic service provider in Maharashtra, including Mumbai. Hughes Telecom has 1.8 lakh subscribers.

Immediate focus
Says Tata Teleservices chairman Dr J. J. Irani: "The ultimate merger with VSNL will take some time to happen. The immediate focus is the merger of Tata Internet Services with the company." VSNL, the international long-distance (ILD) player, is also getting into national long-distance (NLD) telephony, and has invested Rs 1,000 crore in backbone infrastructure for this purpose.

Given this significant presence, it is natural for the Tata Group to have one national telecom brand. Says Tata Teleservices chief marketing officer Ajay Sachdeva: "Consumer friendliness is what the brand is all about. A friend is one who is trustworthy, unpretentious, warm and understanding. Tata Indicom embodies all these qualities."

The brand mascot is a cartoon figure of a suited, booted and friendly looking executive. Tata Teleservices will be spending Rs 30 crore this year in building the Tata Indicom brand.

The products and services offered under the brand are telephone (voice), service (fixed wireless, landlines and limited mobile), Centrex (an EPABX without the hassles of maintaining one), voice mail, pay-phone booths, calling cards, NLD, ILD, Internet connections (dial-up and broadband), and virtual private networks.

Outlining the telecom potential in India, Mr Ramakrishnan says: "India, with a tele-density of 4.5 per cent, lags far behind developing countries like Brazil (47.8 per cent), China (27 per cent) and the Philippines (21 per cent)." Citing a Morgan Stanley report, he says the size of the telecom market in India — basic, mobile, NLD, ILD and data put together — is currently Rs 41,000 crore. By 2007 this is expected to grow to Rs 81,000 crore.

The Tata Group, through a combination of VSNL, Tata Teleservices, Idea Cellular and Hughes Telecom, is present as a ‘carrier’s carrier’ (international bandwidth and national backbone), as well as in customer-ownership services (ILD, basic, cellular, Internet and value-added services).

The Tata Group’s competitors in this domain — the Bharti group, and the state-owned Bharat Sanchar Nigam (BSNL) and Mahanagar Telephone Nigam (MTNL) — have a similar presence, while Reliance is in the process of setting up infrastructure for the same. "Our competition does not have the CDMA (code division multiple access) limited mobile right now. The other advantage we have is giving fixed wireless instant connectivity to subscribers," says Mr Sachdeva.

Aiming high
"Our target is to capture 10 million customers by 2007, of the 100 million projected, and offer 65 per cent of India’s voice and data traffic," says Mr Ramakrishnan. His confidence stems from the fact that all the six circles — Andhra Pradesh, Delhi, Gujarat, Tamil Nadu, Karnataka, Maharashtra — are lucrative, category A circles that stand ahead of other regions on several economic parameters.

These circles account for 65 per cent of the total telecom revenues in India and 48 per cent of long-distance telephone traffic. They also encompass 56 per cent of the country’s basic telephone lines and 69 per cent of its mobile subscribers. "As a percentage of the country’s total population, the six circles account for 35 per cent. Similarly, 46 per cent of India’s automobiles (two- and four-wheelers) ply in these circles," says Mr Ramakrishnan.

Tamil Nadu, with 3.84 million fixed lines, is one of the highest revenue earners for BSNL, and the average revenue per line is Rs 800 per month. Chennai, with 1.9 million land-line connections, ranks first in average revenue per user. In fixed and mobile telephony Tamil Nadu is worth nearly Rs 4,000 crore a year.

"As of October 2002 the total cellular user base in the state is 7.4 lakh, with a mobile tele-density of 1.19 per cent," says Tata Teleservices chief operating officer (Tamil Nadu circle) R. Balachandran. It is into this lucrative market that Tata Teleservices has entered as the third basic service provider. "There is room for more than one private player," says Mr Ramakrishnan.

But the entry was not easy. Having laid 2,400 km of the optic-fibre backbone in Tamil Nadu, Tata Teleservices is yet to get the state government’s permission to dig roads and lay cables in Chennai (to offer wire-line services). "I even met the chief minister to get ‘right of way’ to start the land-line service, but there has been no reply from the state government," says Dr Irani.

Overcoming the odds
Despite this hiccup, Tata Teleservices decided to launch its services. The company will offer its fixed wireless voice and data service by using a local multiple distribution system and microwave solutions, and also deploy new technologies like corDECT, apart from the attractive limited mobility.

More than the basic service providers, Tata Teleservices is throwing down the gauntlet to the city’s cellular players with its limited mobility service. In Chennai there are three cellular operators. The issue for Tata Teleservices is the higher cost of telephone instruments — currently Rs 8,000 in Tamil Nadu and Rs 6,000 in Andhra Pradesh (due to a lower sales tax).

With no airtime or incoming call charges, a monthly rent of Rs 200, and a call rate of Rs 1.20 for three minutes, Tata Teleservices is offering mobile telephony within a specified range called short-distance charging area. Nearly 80 per cent of cell-phone users do not use a roaming facility. And there are a large number of mobile phone subscribers who do not move out of the city, but are heavy users and pay a lot to service providers.

"It is truly a home phone in your pocket," says Mr Balachandran. Apart from the heavy mobile users, the company will be targeting small and medium enterprises and corporates for its phone and other services.

Besides Chennai, the other cities that will be covered in the first phase in Tamil Nadu are Coimbatore, Erode, Salem, Madurai and Trichy, all commercial centres. "In the first phase we will cover 25 markets. Later, we will fulfil our licensing commitments by covering the entire 130 SDCAs (short-distance charging areas)," says Mr Balachandran. He says the company will appoint franchisees to sell its products and services.

In Karnataka the company has installed 200 km of its optic-fibre backbone within Bangalore and plans to extend it to 2,000 km across the state over the next three years.

Unique selling points
"Quality of service, cost to the consumer and speed to market will be our unique selling points," he replies, when asked about the increasing and tough competition. Tata Teleservices is looking to woo companies with an annual telecom spend of Rs 10 lakh, high-spending individual users, pay-phone booths, and small and medium enterprises.

The company will work towards a healthy average revenue per user (ARPU). According to Mr Sachdeva, in Andhra Pradesh the ARPU, in the wire-line segment, is Rs 1,400 per month and Rs 700 for limited mobility. "Some of the 2.14-lakh subscribers are taking a second connection from the company. With good demand, we will expand our presence at an additional outlay of Rs 500 crore in the next two years."

Adds Mr Ramakrishnan: "In Andhra Pradesh, we are adding 10,000 subscribers every month. During the first half of the current fiscal, the company has logged Rs 113.4 crore in revenue." The company hopes to close this fiscal with a subscriber base of three lakh in Andhra Pradesh.

As for Tata Teleservices’ answer to BSNL’s 50-per cent reduction in nighttime dial-up Internet access charges, Mr Sachdeva says: "We don’t want to play the price game. If there is a price war, then one can’t stay long." On the other hand, the introduction of the prepaid CDMA service and short-messaging service will further increase the company’s subscriber base.

Tata Teleservices officials, in the meantime, are gearing up to get started in Delhi and Gujarat in December 2002.

Uploaded on November 13, 2002