Still betting on CDMA

Tata Teleservices has trebled its market share in a year. Is this good enough?

"Sirf baat, ya tarakki ?" (Only words, or progress too?) That was the tagline for the Tata Indicom campaign launched last year, around the time when Tata Teleservices (TTSL) came up with the Non-Stop Mobile offer "� a two-year no-recharge scheme "� the first of its kind in the industry.

The scheme fetched TTSL and Tata Tele Maharashtra (TTML) a million subscriptions in a month. Things have understandably slowed down since then. But there's been progress.

From just under three per cent a year back, TTSL and TTML have together grown their share in the mobile telephony space three-fold to 9.5 per cent today with 11.67 million subscribers.

Now, TTSL CEO Darryl Green has set his sights on 20 million subscribers by March 07. That seems to be some way off "� because as of now the subscriber base is just nudging 12 million.

Besides, the growth is coming at a price because the blended Average Revenue Per User (ARPU) is around Rs 330 compared with Rs 440 for Bharti Airtel, with pre-paids account for 90 per cent of wirless subscribers.

Indeed, critics write-off the increase in the share as a new player getting its fair share on a low base. From here on, they say, it's going be tougher. But Green believes that with a near 12 million subscriber base, an important benchmark has been set. "The bar has been raised and seven lakh subscribers a month has become a kind of natural base for us."

However, the biggest problem, industry watchers point out is CDMA technology, which has not caught on mainly because CDMA handsets are more expensive than GSM handsets.

"For how long are they going to continue subsidising handsets," asks a consultant. The CEO, however, is clear that CDMA technology is the way forward.

In fact, that's the core of the Tata telecommunications strategy. "We will leverage the advantages of CDMA technology to create some tangible benefits for the masses, "says Green, adding that the technology has hardly been exploited.

"We want to introduce more value-added services, more than just bigger screens and more memory and we're working with Samsung and LG to see how this can be done."

Observes Alpesh Shah, Boston Consulting Group" CDMA technology is comparable to GSM if well-used. While CDMA handsets may be costlier, as the base grows vendors will see the opportunity and CDMA handset prices too will be competitive.

While Green too believes that handset prices are on their way down, he's not too worried about them being slightly more expensive because he feels there's increasing affordability and a willingness on the part of consumers to pay for additional features.

"We're in a sweet spot where the level of affordability is going up and we've had some success at the higher end thanks to colour handsets," he says.

Deepak Kapoor, ED, at Pricewaterhouse Coopers, believes that while trying to bring down the cost of the service, telcos need to introduce targeted value-added services for different segments.

And TTSL, which has already built up a corporate clientele through its FWTL (fixed wire line telephone) services plans to focus even more on the enterprise segment.

Says Green, "Companies are already convinced about our technology and we're going to be adding services," though he will not disclose what these are.

In short, the gameplan is to make a tangible difference to users both companies and individuals especially in the area of data throughput, for which CDMA technology is particularly suited.

In the meanwhile, the Tata network which went national only in December 2004, will be available in 4,000 towns by March 2007 from 3,100 towns currently.

For perspective, Bharti 's network is present in 4,026 towns and it has 25.6million subscribers. Having spent Rs 3,000 crore on capital expenditure in FY06, TTSL will be forking out another Rs 4,000 crore in FY07. Between TTSL and TTML, revenues for FY07 should touch Rs 2,000 crore.

"We've been EBITDA positive since Q4FY06 and we should end FY07 the same way," says Green who feels it could be another couple of years before the venture turns PAT-positive, though TTML might make it earlier. With combined losses of around Rs 1,500 crore, that would be quite a turnaround.