labels: tata group
Telecom services: Tata group news
13 February 2002
The telecom services sector in India is on the ascendant. Subscriber numbers are expected to more than double in the period 2001-06, from 35 million in March 2001 to about 85 million in 2006. India will mirror the global trend of very high growth rates in mobile vis-à-vis fixed (40 per cent CAGR in mobile vs 16 per cent in fixed). However, fixed line teledensity in India being very low at 4 per cent absolute growth in fixed lines will lead additions in mobile subscribers over the next 10 years.

In spite of the high projected growth, teledensity in 2010 will be 11.5 per cent, falling short of NTP99 targets of 15 per cent. Revenues would grow, albeit much slowly, in the light of significant reductions in tariffs. By 2006, telecom services is expected to be a Rs 66,000-crore sector, contributing 5.4 per cent to India's GDP.

Several parts of the sector are being liberalised. Unlimited entry of new players has been allowed in Basic, NLD, ILD, ISP and Infrastructure businesses. ILD and Internet telephony are the latest in the deregulation agenda, with the former being opened up in April 2002, and the guidelines for the latter expected to be announced soon.

However, there are still uncertainties about how regulation would shape up. Customer choice mechanisms and interconnect terms for long distances services are yet to be finalised. The dispute regarding limited mobility has not yet been resolved. These will result in changes in tariffs, market share and revenue share of access and NLD/ILD players, thereby impacting the strategies and plans of various players.

Three to four leading private players are likely to emerge as competition to the incumbents, BSNL and MTNL, which have significant presence across the value chain. The Tata group, Reliance Infocom and Bharti Televentures have announced plans of being integrated telecom companies offering end-to-end services to customers. Hutchison on the other hand appears to be focused on cellular services, with no stated intention of entering other businesses.

These are interesting times for the Tata Group - emerging as the largest private sector telecom player with a significant presence across the telecom value chain. The acquisition of VSNL is the latest in a series of moves that the group has taken - gradually and quietly - to expand its range of coverage and services.

The Tatas were one of the earliest (private sector) entrants into telecom services: In 1995, Tata Cellular (TCL) won the license to offer mobile services in Andhra Pradesh; followed by Tata Teleservices (TTSL) which successfully bid for the basic license in AP in 1997. Tata Power was also the first to light up a broadband network in India, using DWDM technology in the Mumbai metro network.

TCL later merged with Birla AT&T to expand market coverage to four circles. Birla Tata AT&T (BTAL) proposes to further merge with BPL Mobile, thus forming the largest cellular services company in India with nearly 1.4 million subscribers. TTSL, which recently crossed the 1-lakh subscriber-mark in AP, has signed up licenses to rollout basic services in four new high potential circles in Delhi, Tamil Nadu, Karnataka and Gujarat).

The VSNL acquisition catapults the Tata group into a leading position among private Indian telecom players. With a 100-per cent share in the lucrative ILD business, a leading share in Internet services and a favourable NLD license, VSNL perfectly fits in with the group's plans of providing integrated telecom solutions. The Tata-VSNL team embarks on its next challenge - ensuring a smooth transition at VSNL and integrating business plans for ILD, NLD and Internet/date services - to enhance value for its stakeholders: customers and shareholders.

The Tata group aims to be a market leader in the telecom services space. The strategic intent is to capture a sizable share of customers and end users; customer ownership will be leveraged to anchor the group's other telecom offerings. The group will focus on providing an appropriate mix of fixed/wireless and voice/data services to customers in select high potential areas. The Tatas will compete on superior product quality, customer care an innovative bundling of services. Infrastructure is being built on selective routes; lease/swap options are being explored elsewhere. The Tata group recognises that the strategy while being robust has to remain flexible to respond speedily to developments in customer behaviour, competition, technology, regulation and M&A opportunities.
also see : Rationale for disinvestment
Disinvestment procedure
Acquisition of CMC
Acquisition of VSNL

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Telecom services: Tata group