How Tata Tele lost the tele­com war

Com­pany missed the op­por­tu­nity to mar­ket ben­e­fits of CDMA tech­nol­ogy, say ex­perts

The Hindu Business Line - - IT & TELECOM - RASHMI PRATAP

The in­creas­ing debt and com­pe­ti­tion in the Indian tele­com sec­tor has claimed an­other vic­tim – Tata group’s tele­com busi­ness un­der Tata Te­le­ser­vices (TTSL) and TTML, the listed arm of­fer­ing ser­vices in Mum­bai and Ma­ha­rash­tra.

The price war for data sub­scribers seems to have been the last straw on TTSL’s back. But the load had been be­com­ing un­bear­able for some years now as the tele­com busi­ness was never prof­itable for the salt-tosoft­ware giant. The losses of TTSL stood at ₹3,000 crore last fis­cal while the num­ber for TTML was ₹2,536 crore, mak­ing the tele­com busi­ness un­vi­able.

The com­pany’s jour­ney from Batata (Birla-AT&T and Tata) in the late nineties to Tata and now part of Bharti Air­tel, has been one that could have been planned bet­ter.

Tatas chose CDMA as the tech­nol­ogy to of­fer tele­com ser­vices when GSM was be­ing bat­ted for glob­ally. In terms of user ex­pe­ri­ence, CDMA was more ro­bust.

CDMA vs GSM

“But the missed op­por­tu­nity was mar­ket­ing the ben­e­fits of CDMA over GSM dur­ing the early days of tele­com in In­dia. GSM was mar­keted bet­ter and global mo­men­tum was in GSM’s favour,” says Jayanth Kolla, founder and part­ner at tech­nol­ogy re­search firm Con­ver­gence

1996 –

Tata Te­le­ser­vices was the pi­o­neer of the CDMA tech­nol­ogy plat­form in In­dia

– Ac­quires Hughes Tele­com (In­dia) Ltd, re­named Tata Te­le­ser­vices (Ma­ha­rash­tra)

2002

– Ac­quires li­cence for op­er­at­ing both GSM and CDMA ser­vices

2008 2009

– Ja­panese ma­jor NTT Do­CoMo picks 26% stake in Tata Te­le­ser­vices

– NTT Do­CoMo an­nounces exit from Tata Tele

2014 2017

– Set­tles $1.7 bil­lion dispute with NTT Do­CoMo

– An­nounces merger of its wire­less busi­ness with Bharti Air­tel

2017

Cat­a­lyst. CDMA com­pa­nies, in­clud­ing Tata Tele, fell short of mar­ket­ing the tech­nol­ogy and went for bot­tom-of­pyra­mid sub­scribers.

“They (Tatas) chose a costlier and bet­ter op­ti­mised tech­nol­ogy and made it a poor man’s tech­nol­ogy in In­dia. So they had to pay out big­ger sub­si­dies, lead­ing to poor fi­nan­cials. That was a strate­gic mis­take in the mar­ket,” he adds.

Be­sides, CDMA had some in­her­ent dis­ad­van­tages, the big­gest be­ing that a user could not roam on any other net­work. Even Re­liance and Tatas, which both of­fered CDMA tech­nol­ogy, could not use each oth­ers’ net­works for roam­ing. And in­ter­na­tional roam­ing was ruled out. “CDMA was al­ways costlier due to roy­alty (paid to US-based Qual­comm, the li­cen­sor of the CDMA mo­bile phone stan­dard) and lack of scale. That played spoil­sport in the Indian mar­ket,” Kolla adds.

Alok Shende, prin­ci­pal an­a­lyst at As­cen­tius Con­sult­ing, says the com­pany was hit every time the com­pet­i­tive in­ten­sity in­creased in the sec­tor. “It was one of the ini­tia­tors of price war in the Indian mar­ket, but they them­selves got hit when new play­ers came in 2008. They started los­ing money and every new cus­tomer ac­qui­si­tion be­came costlier. When RJio came, the wedge be­tween the av­er­age and the bet­ter player just in­creased; it weak­ened them be­yond re­pair,” he says.

Tie-up with NTT Do­CoMo

Tatas’ tie-up with Ja­pan’s NTT Do­CoMo also could not change the for­tunes of the busi­ness. The Ja­panese giant in­vested $2.2 bil­lion in TTSL at ₹117 per share in 2009. “The money came in along with cut­ting edge tech­nol­ogy which had seen adop­tion in Ja­pan. But Tatas could not use the money or ex­per­tise to of­fer dif­fer­en­ti­ated prod­ucts and ser­vices,” says Kolla.

“They were not the fastest mov­ing or de­ci­sion-mak­ing com­pany in the sec­tor. The cul­ture of long-drawn pro­cesses that work for older in­dus­try com­pa­nies in the group spilled over to TTSL. When in­dus­try was mov­ing with faster de­ci­sion mak­ing, they didn’t re­act that much,” he adds.

As a re­sult of these strate­gic er­rors, the com­pany fi­nally merged op­er­a­tions with mar­ket leader Bharti Air­tel.

It had lit­tle op­tions left after sit­ting on debt of over ₹50,000 crore (₹35,000 crore for T TL and ₹15,500 crore for TTML), a neg­li­gi­ble sub­scriber base and a poor brand re­call.

Newspapers in English

Newspapers from India

© PressReader. All rights reserved.