Tata Tele rings in more numbers, looks to nationwide GSM launch5 min read . Updated: 27 Aug 2009, 01:05 AM IST
Tata Tele rings in more numbers, looks to nationwide GSM launch
Tata Tele rings in more numbers, looks to nationwide GSM launch
Mumbai: India’s sixth largest mobile and wireline operator, Tata Teleservices Ltd, has become operationally profitable even as it prepares for more intense competition in the market for Global System for Mobile (GSM) technology standard that’s dominant in India.
In an interview, managing director Anil Sardana said Tata Tele had turned profitable measured by Ebitda, or earnings before interest, taxes, depreciation and amortization.
“We are very clearly Ebitda positive for last one year," he said. “Most of the operators who started in 1994 turned Ebitda positive in about eight to nine years’ time, cash positive in 10 to 11 years, and PAT (profit after tax) positive in 11 to 13 years. At Tata Tele, we became Ebitda-positive in three years."
Tata Tele signed up 2.3 million subscribers in July, up from 625,000 additions in June and easily surpassing the company’s record addition of 1.26 million in March, largely on the back of its GSM launch in five telecom circles.
The company does not provide a breakup for subscriber additions in the GSM and rival Code Division Multiple Access (CDMA) markets.
Sardana, a Tata group veteran and an insider who had in the past successfully turned around North Delhi Power Ltd, the electricity distributor in Delhi where the Tatas hold a majority stake along with the state government, came to troubled Tata Tele when expatriate chief executive officer Darryl Green resigned.
Some analysts doubt whether the company is completely out of the woods yet although they say Sardana’s entry had put Tata Tele in a bit of a “ramp-up mode" and with a “more visible market presence."
“They have made some progress," said a management consultant who spoke on conditions of anonymity because he has worked with Tata Tele and other telecom firms.
“The business matrix has clearly improved and there are some signs of trending upwards," he added, referring to the addition of the GSM network and wireless Internet cards business.
Mint had on 15 December reported about Tata Tele’s capital restructuring exercise as part of which the company wrote off Rs5,141.28 crore by halving equity capital, and a sizeable portion of the share premium account, and another tranche of Rs1,648 crore by revaluing its stake in Tata Teleservices (Maharashtra) Ltd, its listed subsidiary.
The three-pronged exercise also saw the induction of a new strategic partner NTT DoCoMo Inc, in November 2008, when the Japanese telecom firm paid $2.7 billion (Rs13,070 crore) for a 26% stake in Tata Tele.
Sardana, however, denies that it was an asset write-off. Funds invested by shareholders, mainly the Tata group, before the entry of DoCoMo had brought down equity capital and share premium by half, he said.
When Sardana took over in August 2007, he spent a month analysing processes and in September the company launched a 900-day plan that was a roadmap for when the company would turn Ebitda and cash positive. “When I came in, I was surprised that we were players in patches, we were not there in many geographies, we were operating in a truncated manner," Sardana recalled.
Now, Tata Tele is a pan-India operator with licences to operate in all 22 telecom circles.
Until recently, however, the firm was primarily a code division multiple access, or CDMA, operator. But like Reliance Communications Ltd (RCom), which now has a national presence in both technologies, it started rolling out GSM services, too, becoming only the second provider to offer both.
“Whatever numbers we had internally set as a target for the first quarter of our launch, we achieved in just 10-15 days," Sardana said.
A 21 August report by Gaurav Jaitly and Abhishek Gupta, analysts with Reliance Equities International Private Ltd, acknowledged the impact of Tata DoCoMo’s entry into the GSM market.
The report noted that July saw net subscriber additions of 14.4 million by all firms nationwide, just shy of the 15.6 million record set in January.
“DoCoMo’s impact could be more than a one-month phenomenon," the report said.
“We believe Tata DoCoMo’s ‘per second’ billing plans could cause further disruption in the industry in the near term as the company expands nationwide coverage. In addition, unlike RCom’s GSM launch offering in January, the impact of DoCoMo’s plans could be more sustainable," Jaitly and Gupta wrote.
They also pointed to differences between the two launches that “might lead to Tata DoCoMo having a more sustained impact on industry economics". While RCom lauched GSM nationwide, write the analysts, Tata DoCoMo has taken a phased approach to its launch.
In the five circles where the company launched services in July—Tamil Nadu, Andhra Pradesh, Karnataka, Kerala and Orissa—DoCoMo garnered 34% share of net additions. Thus, unlike RCom, “we might not see a similar drop-off in DoCoMo’s net additions in the coming months as it expands nationwide coverage (expected to be completed by the end of October 2009)", Jaitly and Gupta wrote.
Unlike RCom’s offerings, which were driven by low upfront costs to acquire an SIM card at Rs10-25 for a lifetime connection, and promotional plans of 5-10 minutes of free daily talk time for the first three months, Tata DoCoMo’s entry points are in line with the industry (Rs49 for a life time connection).
However, the telecom industry consultant mentioned earlier said Tata Tele continues to grapple with a lack of focus. It is now straddling two technology platforms and going forward, could cause its resources to be spread thin, the consultant said.
Sardana shrugged off the warning.
“For us being a dual technology player is a natural part of our evolution in the telecom space," he said. “Today, there is a clutter of platforms, and spectrum is limited. Gradually, we will see customers vying for better voice and a better-quality experience. Having a presence on both platforms makes us better equipped to handle demand of the mass market that still looks for pan-India coverage and better voice and network quality."
Tata Tele is not taking its focus off the CDMA market. The company is doing a joint study with the Indian subsidiary of Nokia Oyj, which will see the market leader in mobile phone handsets to offer more of a choice in the number of CDMA compatible handsets it sells in India.
Sardana says his team is also working on a project to devise a CDMA SIM card that can be used in any handset, but this will take at least one year to deliver results..
Sardana doesn’t like Tata Tele being referred to as the sixth largest mobile and wireline operator in the country. It is an unfair descriptor, he says, because “others have gone ahead of us because of acquisitions. We are now all pervasive in terms of our reach and our network."
“Being a late entrant in the mobile telephony space, we gained our customers from the bottom of the pyramid," he says.