MTS plays data card

The brand, which completes a year in India today, is betting big on the net data segment

The odds appear to be heavily stacked against telecom services provider, Mobile TeleSystems OJSC (MTS), which completes a year of its operations in India today.

For one, the brand promoted by Sistema Shyam Teleservices (SSTL), a joint venture between Sistema of Russia and the Shyam Group of India, is a late entrant in a heavily crowded market where 11 other major Indian and foreign telcos operate. More importantly, it is betting on the code division multiple access (CDMA) space in a country where GSM giants rule the roost.

Figures alone don't tell a very encouraging story. Brand MTS (the brand symbolises 'new life') has just around 3.5 million subscribers (there are nearly 550 million wireless subscribers in India). Leonid Musatov, chief marketing officer (CMO) of SSTL, acknowledges the fact. “Yes. We are a very young brand. We may not be very prominent in the voice segment, that's not our focus area. But we are significant players in the internet data segment. That’s our strength,” he asserts.

Present in 12 circles till date, MTS expects to have a pan-India presence and break even by 2012. “Even now, we have a roaming arrangement with other telcos. So, in a way, we are present everywhere,” says Musatov.

MTS has been relatively low-profile in the Indian market and released its first TV commercial just around a month back. But the brand has been using its Russian ties to make the right noises. For instance, in coordination with JSFC Sistema, MTS hosted the first ever live webcast interactive session of Vladimir V Putin, Prime Minister of Russian Federation, when he visited India on March 12 this year. It has also been harping on the fact that Indian business leaders could reach out to the 89 Russian regions with the help of lower call rates (Rs 4.99 per minute) on the MTS network. MTS has also tied up with over 200 operators across 90 countries to offer its SMS sevices.

MTS India has also played the data card well. Late last year, it announced that its MBlaze data service (3.1 Mbps data speed) comes at India’s lowest tariff of just 10 paise per MB with no roaming charges.

The three major CDMA operators - Bharat Sanchar Nigam Ltd (3G EVDO card), Reliance Communications (Reliance Netconnect) and Tata Teleservices Ltd (Photon+) had earlier rolled out similar services. On a comparative basis, the services are estimated to be 20 times faster than other wireless broadband connections and 10 times faster than average fixedline broadband connections in the country, a fact which GSM players resent.

“Data services are going to expand beyond the metros with people demanding real-time information and knowledge. We see the market expanding beyond the corporate user to include SMEs and students,” says Musatov.

MTS is also tying up with vendors like HP, Dell and Lenovo to bundle high-speed data dongles with personal computers. It has also charted out plans to launch smartphones ranging between Rs 5,000 and Rs 30,000 while the regular mobiles are priced between Rs 1,000 and Rs 20,000. The company introduced a half-a-second pulse rate per paisa in Karnataka at the time of launch.

The telco, nevertheless, plans to increase its advertising spend. “You will see more TV advertising in the coming weeks. We were one of the sponsors for the World Hockey Cup (but not the Indian Premier League (IPL) matches). We are exploring similar sponsorship partnerships. The Commonwealth Games, too, is definitely on our agenda,” says Musatov.

But analysts are not that impressed. “MTS with its aggressive price play has emerged as a challenger in many circles where it competes. But while subscriber addition has been healthy, it is yet to cross the 1 per cent market share at the national level that provides a crucial momentum to acquire further scale and market recognition. In a crowded market place, with a CDMA platform that has traditionally not enthused consumers, the challenge for MTS is to acquire a unique position that is beyond that of a price challenger,”says Alok Shende, principal analysts, Ascentius Consulting.

Regardless, MTS is pushing forward. “We have no immediate plans for GSM,” says Musatov.

What could help MTS in the meanwhile, say some analysts, is that CDMA subscribers can now use the open market handset (OMH) technology to switch between CDMA operators (by simply taking the SIM card and inserting it in another handset —this was not possible earlier for CDMA users which discouraged its use).

And given the fact that India lacks broadband penetration (just around 7 million broadband connections for an over 1 billion population), MTS could evaluate employing EVDO on its CDMA network to provide high-speed wireless internet access.

The data average revenue per user (ARPU) is much higher than voice and given the limited competition, MTS can carve a unique niche.