Quality of service will be a key differentiator4 min read . Updated: 09 Oct 2008, 11:57 PM IST
Quality of service will be a key differentiator
Shyam Telelink Ltd, a joint venture between India’s Shyam Group of companies and Russian telecom firm Sistema SSA, began its pan-India roll-out of cellular phone services, based on the CDMA (code division multiple access) technology standard, from Jaipur late September under the brand name, Rainbow. It is the first among the country’s new crop of mobile phone firms to commercially launch services.
In an interview, Vsevolod Rozanov, president and chief executive of Shyam Telelink, the new phone company, spoke on the firm’s plans for the Indian market. Edited excerpts:
What is the roll-out strategy, what is the USP (unique selling proposition) going to be for your venture?
Our USP will be honesty in communication, no hidden charges, and providing the best returns on investment without, in any way, compromising on the quality of offerings to the end consumers. We are going to be offering simple, very clear and understandable tariff plans for our customers. Pan-Indian strategy will focus on simplicity in all our marketing strategy.
What is the investment that will involve?
Sistema has announced an investment of $5.5 billion (Rs26,785 crore) for development of the wireless business in India over the next five years. So far, we have invested more than $1 billion.
Where do you see the Indian telecom market moving towards? Is it going to be data, with 3G/Wimax coming in, or is voice going to contribute majority of revenues for telcos?
In the next three years, it will be voice, predominantly voice. The official penetration is about 29%. The actual penetration should be significantly lower — approximately 20% or may be even less. (Customers) would gradually increase their data consumption. But it will constitute very small portion of their Arpu (average revenue per user), may be 10% or 15%.
With intense competition in the Indian telecom market, driven by tariff wars, what would be the differentiating factor for someone to subscribe to Rainbow?
The telecom market in India is still evolving and growing. There is enough place for newcomers in the market. Yes, the competition is very tough, but on the other hand, the penetration is very low. If we talk of 800 million people going to use mobile telephony, we think that as a newcomer, we basically can take lessons learnt from other players in the market... New technologies and new techniques can be applied. These can be less than the cost of previous deployments by other players already here.
Yes, the key corporate clients, or high Arpu clients, have already been taken by our key competitors. My experience shows that people with higher Arpus bargain for discounts, while people who give $1 Arpu, $2 Arpu are likely to bring in $3 to $6 Arpu. I don’t know the break-up for India, but in Russia the feel is that until $10 (billing a month) there is a very clear growth path. When someone is spending $1-2, it’s your goldmine. These are the people who really grow if you are able to retain them.
In the metros the teledensity is reaching saturation levels, so where do you see the opportunity coming from?
There are two basic resource opportunities — first is the churn of subscribers in the metro (and) urban areas, and second, the newcomers in the smaller circles in the rural areas. The market here is characterized by extremely high level of churn and I think last year, reports stated that churn was above 40% in some markets. Basically, there is a search for better tariffs because people are extremely price conscious. Also, people are not very brand loyal and generally are not happy with the service.
The level of service...is also an opportunity for the newcomer, as we are aiming to invest a lot more (and) aiming to have high standards of network service quality. There is a clear aim internally to focus on (the) quality of service (and) improvement is a key differentiator for us.
What are the numbers of subscribers that Rainbow is looking at in the next three-five years? And, Arpu?
I don’t think Arpu is a proper measure, really. For me the market share is important…the market share in terms of number of subscribers. Arpu per se will not give you lot of sense, because it is (an) extremely complex figure coming from various combinations such as usage, number of subscribers, services consumption, number of SIMs (subscriber identification module cards), including fake SIMs.
I would love to have hundreds of millions of customers with low Arpu. If I have a few million subscribers with high Arpu, it will not enable me to maintain network all over India profitably. So, this is all about subscribers and subscriber share, as soon as you get scale, you are fine whatever is the Arpu.
By the way, at the same time, respectable competitors, leaders in the market, I would not name them, enjoy very high Ebitda (earnings before interest, taxes, depreciation and amortization — a measure of operating profit) margin compared with Seychelles or other markets.
An Ebitda margin of 35% plus, it is a pretty good margin for your peer markets. That actually shows that it is possible to reach that high margin mostly due to the scale and that’s the game. If there is dependence between Ebitda and ‘something’, then that ‘something’ is market share.
What kind of market share are you looking at?
Ideally, I would say that we would like to reach a market share of 5% plus in the next three-five years.