New Delhi: Once considered an also-ran in telecommunications, Tata Teleservices Ltd has set the sector alight with its pay-per-second and pay-per-call tariffs introduced in July and September, respectively, forcing others, including market leader Bharti Airtel Ltd, to follow suit. Lloyd Mathias, chief marketing officer, Tata Teleservices, spoke in an interview on what prompted the radical move and the firm’s future strategy. Edited excerpts:

Future strategy: Tata Teleservices chief marketing officer Lloyd Mathias says retail will be a big thrust area. Harikrishna Katragadda / Mint

We are seeing a new aggressive shift in the way Tata Teleservices operates. Why such a dynamic change?

Fundamentally, some big things have happened in the last year-and-a-half. In terms of orientation, one part is getting the financials in order by getting 26% equity and hiving off your passive infrastructure. The first was a getting a strategic partner in DoCoMo. This was not just about capital infusion but more about re-looking at the whole thing. DoCoMo has dominant share in clearly the most advanced market in the world (Japan). There is a lot of technology that we had line-of-sight to.

Another big element was the hiving off of the passive infrastructure where we got out of the tower business and growing it into a separate entity. Getting Quippo as a partner was one part bringing our whole focus into mobility.

The second part is reorienting your entire approach to the market. We have carved out our business into four distinct entities. In terms of GSM and CDMA (technology platforms—global system for mobile communications and code division multiple access), we have Tata Indicom and Tata DoCoMo playing in the CDMA and GSM space. Then we have clearly segregated our data brand, which is known as Tata Photon, and we have the fixed wireless phone, which is Walky, which we will be relaunching in November.

The challenge is with DoCoMo and Indicom; how do you find the appropriate value proposition without entirely cannibalizing on each other.

What does DoCoMo bring to the table?

We have a very close working relationship. Right now there are nine executives based out of Delhi and Mumbai who work as part of the teams. We also have five joint working groups including a VAS (value-added services) group, devices group, enterprise group, business group; and all these groups work on specific projects.

For instance, the enterprise group worked on a project where we decided on how do we target all the Japanese groups out of India. For Japanese corporates, it makes sense to tie up with DoCoMo in India. With DoCoMo, we saw that they had actually changed the rules of the game in VAS, though very differently. Today in Japan, anything less than $10 (around Rs466) is no currency and people use their phones. And very often they are DoCoMo phones.

DoCoMo has enabled the whole ecosystem. You can go to the railway station or cinema and book your ticket by flashing your phone. It has done away with the loose-change economy and made the phone replace cash.

What is the story behind the new brand positioning and advertising drive for Indicom?

Historically, Tata Indicom has always been a strong value proposition because it was a late entrant in the market. A lot of consumers have typically been towards the middle or bottom of the pyramid. That’s a reality—we didn’t get the chance or the first pickings of the first years when the high Arpu (average revenue per user) consumers were acquired. While the value proposition got established, I think it also in a sense positioned the brand as something that is for the mass market.

What we are looking at right now are the core strengths of the brand and one of them is the network. We have the lowest call drop rates.

But isn’t it also true that one reason for the strong network scores is that your network is relatively uncluttered due to a low subscriber base?

Network consideration today has three aspects. People want good coverage, they want network or clarity and they want (it to be) congestion free. If these things are in place, then you bother about brand and other things. We are bringing back that basic thing, saying that its time to revisit your network because none of these three things are happening.

The other aspect is that MNP (mobile number portability, which enables a consumer to change operators without changing the phone number) is around the corner, leading to people being more conscious. If you can migrate to a better proposition of a better tariff plan and network without changing your number, then you should look into it. The sooner we up the ante on that proposition, the better, and the best time for that is now—a couple of months away from implementation of MNP.

Speaking of MNP, will there be much of an impact?

In percentage terms, the churn will not change dramatically. The difference is the revenue churn will be far more than the number churn. Most of the churn is entry level right now. With MNP, higher revenue users, who have had their connections for years, will be able to churn.

The reality is there are 50 to 100 million consumers who have multiple SIMS (subscriber identity module, a technology that activates and identifies a unique wireless phone connection). People are very savvy. With number portability, the churn will be very revenue linked.

How is the Re1 per call tariff for Indicom sustainable?

There are two parts. One is basic human behaviour—just because you migrate to a talk as much as you want tariff, you won’t double you call length. The set of people you call and the time you talk to them won’t change. Our initial experience has shown us that call lengths went up but by not much. Our average call length used to be around 1 minute 40 seconds, (which) went up to 2 minutes 20 seconds. On the base, not everyone swings. A lot of people find it attractive and there are a fraction who have increased their calling dramatically, but on the whole, there isn’t much change. The second part is that, if you look at the current cost of network and financials, you don’t lose money till 5 minutes. The interconnect charge is Re0.20 per minute.

Now that everyone else is getting on to the per-second bandwagon, what is your strategy?

We are confident that we have enough differentiators in our offering that will make a fair amount of consumers stay. With CDMA, almost all our acquisitions happen when consumers buy a phone. They are not SIM switchers.

In GSM, you have the SIM switch. The Indicom consumer, therefore, tends to be a little bit more sticky.

Tata DoCoMo, on the other hand, is playing aggressor—it’s a new brand so there is no fear of churn. DoCoMo can afford to be the aggressor so it is taking this two-pronged effort—diet SMS and pay per second—and actually boosting acquisitions.

The other key part to our strategy is data. We are betting pretty big on Photon. We are also doing a lot of stuff with the HNIs (high net-worth individuals), for instance, premium data services that enable faster data access with speeds up to 1Mbps.

What about handsets?

Recently, we launched the Samsung Android handset. In CDMA, we are going to be launching a slew of handsets end of this year and early next year. Right now we have the basic suite of offerings. We are looking at the mid-range where a lot of consumers who have been on the network are looking for upgrades. So there will be a whole series of handsets that may not be locked to our network.

In the first few years of our business, virtually all our business came from the bottom of the pyramid where a consumer bought a Rs1,000 handset and he got airtime blocked in.

Now, many of those earlier consumers are looking for upgrades, so we are going back to them with mid- to high-level handsets in order to make relevant offerings to them. Since we have one of the largest set of retail stores (about 4,000), which gives us a captive set-up to sell handsets, retail will be a big thrust area.