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In Focus
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An “Idea” for Tatas’ Telecom Biz
Tata Teleservices has been losing subscribers in recent months. Now, to stem the recent tide of reverses, the company has gone in for brand integration, hoping that the move will help revive its flagging CDMA business. Will that help to get its mojo back?
Issue Date - 10/11/2011
By all accounts, it hasn’t been good going for Tata Teleservices so far this year. First, its name got dragged in the 2G scam, forcing the normally reticent Ratan Tata to respond to growing media queries. Second, things have slowed down on the business front too. Tata Teleservices core CDMA business (which forms 40-50% of its telecom clientele) is faring poorly. The company lost its number four ranking in the telecom pecking order to the Idea Cellular brand. Tata Teleservices, which owns the Tata DoCoMo brand, saw its wireless subscriber base fall from 91 million at the end of June to 88.3 million at the end of July, data from industry body Association of Unified Telecom Service Providers of India show. According to the Telecom Regulatory Authority of India, only about 48% of Tata Tele’s subscribers were active at the end of June. The sharp contraction comes on the back of a relatively weak subscriber addition of 2.1 lakh in June. On the other hand, rivals Bharti Airtel and Vodafone added 1.5 million subscribers each in July, while Idea Cellular added a million.

For Tata Teleservices, the past six months reveal a story of constant loss of market share, and the brand’s inability to attract new customers. As per Telecom Regulatory Authority of India (TRAI), in March this year, Tata Teleservices had a market share of 10.98%, while Idea Cellular had a market share of 11.03%. But from here on it’s market share has been steadily going downhill: April (10.93%), May (10.80%), June 10.68 and 10.23% in August. On the other hand, Idea has taken its market share to 11.37% in the intervening period. Compared to the likes of Idea, Airtel and Vodafone, which have been adding about two million customers a month, Tata Tele has struggled to add new subscribers and in fact it has lost more of its existing subscribers. From a high of 8% of new customer additions in April, the company has been averaging 2-3% in the months of May, June, July and August. Though the company attributes the diminution in its subscriber base to its ongoing re-alignment exercise, and purging of numbers not in use for more than six months, the fact remains that today Tata Tele is languishing behind the likes of Sistema (MTS), Aircel, Uninor and even BSNL, in new customer acquisitions. In March it had roughly 89 million subscribers, which at the end of August stood at 88.5 million.

Even otherwise, the businesss has been bleeding. The Tata Group has so far invested roughly Rs.400 billion in the telecom business. It had to write-off nearly Rs.70 billion in losses between its two companies, Tata Teleservices (TTSL) and the listed Tata Teleservices (Maharashtra) (TTML). In 2009- 10, it declared fresh losses of over Rs. 20 billion. Tata Communications, the third telecom company in the group, which took over the assets of government-owned VSNL, too has made losses.

Clearly, urgent action is called for. And Tatas have been taking steps to stem the tide of losses. After a lot of thought an action plan has been readied, and has been put to implementation now. Among the most stringent of these measures is that Tata Indicom (the CDMA offering) branding will cease to exist, and even the CDMA offering will now be bundled along with the much popular and profitable GSM offering under the Tata DoCoMo brand. An internal reorganization to ensure greater focus on single-brand marketing (like Reliance GSM and CDMA) around DoCoMo will be put in place. The company is aiming to save marketing costs through this exercise, and the savings will be ploughed back into the system for customer and demand generation. The company will focus on business verticals like mobility, which will comprise both GSM and CDMA offerings under the Tata DoCoMo brand. Similarly, there will be a home solutions vertical, which will encompass both GSM and CDMA offerings for home solutions products like the Tata Photon, et al.


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