"We would be pushing hard our mobile CDMA services." - Views on News from Equitymaster

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  • Feb 18, 2004 - "We would be pushing hard our mobile CDMA services."

"We would be pushing hard our mobile CDMA services."

Feb 18, 2004

Y. V. Lakshminarayan Pandit is the Chief Operating Officer (COO) of Tata Teleservices Maharashtra since April 03. Prior to this he was the COO of Tata Teleservices Karnataka. He has over 25 years of experience in leading multinational companies both in India and overseas. He was Head of the Personal Products Division (Pond's) with Unilever Group in India and Regional Director (Asia Pacific) for Arvind Mills based in Hong Kong. He has a Masters in Physics from Bangalore University and an MBA from the Indian Institute of Management, Ahmedabad.

In an interview with Equitymaster, Mr. Pandit talks about the challenges in the Indian telecom industry, how he proposes to grow Tata Teleservices Maharashtra amidst these changes, and his vision for the company.

EQTM: We seem to be in the final phases of telecom sector deregulation. What are your views regarding the same.

Mr. Pandit : I think still there is quite some way to go. But we are in the right direction. I think with the unified licensing scheme, we have made a very good beginning. And today we are talking about unified license for technology and unified license for geographical operations. That is the right beginning. But ultimately you have to move to a stage where there is unified license that covers all. So that with one license you can provide NLD, ILD, mobile, fixed, everything. Today, the unified license talks about basic, cellular and limited mobility, all under one license. But ultimately, it has to move to a stage where there is a single license for any kind of telecommunication service.

EQTM: What are the advantages of CDMA over GSM? What are the disadvantages?

Mr. Pandit : CDMA offers several significant advantages. One of the most important advantages is that CDMA supports data services much better than GSM. And the network we have today is already 3G compatible. And, therefore, we can provide a full host of data services to our customers, on our CDMA network. This is not possible with existing GSM networks. They have to make a substantial investment in upgrading their networks to be able to provide this.

Now look at two perspectives. One is the customer's perspective, and the other is the operator's perspective. To the customers, while one is data, the other is voice clarity. On CDMA, the voice clarity is much higher than on GSM. That is basically because the way the frequency allocation takes place across cells, in a geographical area. CDMA uses the same frequency across all cells, while in case of GSM it uses different frequencies across different cells. Therefore, CDMA provides better voice clarity and a smooth hand-off. That is, let us say you are driving from Nariman Point to the airport. What will happen is that you will cross several cells. In GSM, it has to hand over from one cell to another, and if the two are operating at different capacities, it has to disconnect and connect (something known as a hard hand-off). On the other hand, in CDMA, all cells are operating at the same frequency, and so it goes smooth. That is why, in CDMA, call drops are much lesser. This is from the customer's perspective.

From the operator's perspective, given a same frequency, CDMA can support a much higher number of subscribers. Therefore it is more spectrum efficient, i.e., it utilises the spectrum far better than GSM. For us, spectrum is a shortage commodity and, thus, spectrum efficiency comes about as an advantage of CDMA. Second advantage is that CDMA requires fewer cell-sites than GSM. So we can provide coverage basically to four times more number of subscribers than GSM can support. Therefore, the investment we need to make is less.

Now, the only disadvantage for CDMA is that the handset market is not the same as GSM. In CDMA, the handset and the network are invariably inter-linked, while in GSM it is not. I can buy handset anywhere, from any shop, then go to GSM service provider and get my handset activated. This is not the case with CDMA. Even pre-paid for CDMA phones may not remove this disadvantage.

EQTM: Are the advantages of CDMA over GSM, like the cost factor, sustainable going forward?

Mr. Pandit : Highly sustainable! Over a long period of time, I think, the plan is that both CDMA and GSM would move towards 3G, and then move forward, but the investment that the GSM operators would have to make to move on to next-generation networks, is significant. Whereas, we are already on that path.

EQTM: In countries like the US, there is a common regulator for the telecom and broadcasting industries (like the FCC). Do you see similar regulatory structure emerging in the Indian telecom industry also over the long term?

Mr. Pandit : We just had the announcement that the TRAI would also be regulating the cable industry. So, I think we are moving in that direction where there could be probably one regulator. This is all to do with the Convergence Bill, where you are going to converge your data, voice and video, all into one single channel.

EQTM: How do you see consolidation shaping up in the sector? There are integrated players, standalone basic and cellular players.

Mr. Pandit : In the long-term there is no doubt that there will be consolidation in the sector. In all markets elsewhere in the world, what has happened is that there are not more than 3 or 4 operators. The same thing will happen here. Given the large size of the market, and the rate at which we are growing, it is difficult to predict over what time frame this will come. This is because, in this large and growing market, individual operators have enough subscribers coming on to sustain themselves. But over the next 3-5 year period perhaps, it will consolidate. And then we would have large integrated players, who could provide local access, NLD, ILD, Internet services, cable services, or anything that the consumer wants, and anything the corporates want.

EQTM: Is there any particular focus area where the TTML is looking at now?

Mr. Pandit : We are now going to be focusing on building our mobile business, through CDMA. We are also offering residential wireless through CDMA, which is also what we will focus on because that provides easy and convenient phone connections. So we are focusing on these. But at the same time, we have a large customer base who are on our wireline network. We will ensure that we provide them top-class services and that is the key. While we might not grow as fast as we did in the past, those on our network would continue to get world-class services. We are not going to be expanding our wireline at the same rate we did previously, but those on our network would get top-class services. We would be pushing hard our mobile CDMA services.

EQTM: Is the existing infrastructure (in Maharashtra, Mumbai and Goa) of TTML enough to support the subscriber base you are looking at?

Mr. Pandit : We are increasing our infrastructure tremendously, particularly in Maharashtra, i.e., other than Mumbai. Currently, we are operational in about 8 cities (including CDMA in 4 cities). We would be expanding to over a 100 cities in Maharashtra over the next year.

EQTM: What kind of potential do you see in the Wi-Fi market?

Mr. Pandit : Wi-Fi is still at a very nascent stage. We were one of the pioneers in Wi-Fi. We reached an agreement with Barista for providing Wi-Fi services at its outlets. Seeing the response over the past 4-5 months, it is still very nascent. It has not caught on as much as we would have liked it to. That is because there are not many places that are Wi-Fi enabled and customers are not very familiar with the concept. But if you have experienced it, it is amazing speed. The download speeds are fantastic. In the western world, it is catching on. India is slightly behind, but it will catch on.

EQTM: How do you see the competitive landscape shaping in the sector over the next five years?

Mr. Pandit : Today, Indian has 25 million subscribers. China has 250 million. And everybody is forecasting that in the next 3-5 years, India will have 100 million subscribers. So, 75 million new subscribers will come into the market. Who grabs a lion share of that, will be the people who will lead the market.

EQTM: In terms of providing telecommunication services, how do you synergise with other Tata Group telecom companies?

Mr. Pandit : Today, for example, to serve the needs of corporate customers in Mumbai, VSNL, Tata Teleservices, Tata Internet, we have all joined together and formed a group called Tata Enterprise Business Unit. This is the sales and marketing arm for meeting the corporate customers, providing all services, whether it is from TTML, or VSNL, or some other Internet group. So, we are offering a single face to the customers. Already, we have taken steps in the right direction.

EQTM: What kind of investments are you looking at going forward?

Mr. Pandit : Till the beginning of April 2003, we had invested around Rs 24 bn in our network in Maharashtra and Goa. Going forward, we are looking at an additional investment of about Rs 12-15 bn. That will take us till about the end of this year. But then we need to again invest around Rs 10 bn in the years ahead. You need to constantly upgrade your network to accommodate new products, more customers, and more geographical areas. These investments are not highly leveraged and include equity and funding by the Group.

EQTM: What exactly is the structure of the Interconnect Usage Charges (IUC) Regime? Is it a level playing interconnectivity regime? What has been the impact of the same on the company?

Mr. Pandit : It is a fairly complicated issue, the IUC. We have a specialized team that is studying the IUC. But the basic principle is that if the call originates from our network, travels on somebody else's network and lands in another network, the revenue earned is shared among all the players. So, let us assume that Tata Indicom call is made to a BSNL subscriber and it travels on the network of Bharti, Tata Indicom will bill the customer and collect the revenue because Tata Indicom's subscriber has made the call. But since the call has traveled on Bharti's NLD, it has landed on BSNL customer, so what IUC says is that a portion of what you collect is to be given to BSNL. The revenue share is clearly defined depending on the distance traveled.

Then, they have also called what is known as access deficit charge (ADC), which basically is to say that, BSNL, which is the incumbent, has spent enormous amount of money setting up telecom infrastructure, serving the rural customers, plus their basic monthly rental is highly subsidized. To compensate for that, others have to pay roughly about 30 paise per minute. Or, access deficit charge is given to all basic service operators.

EQTM: As the company expands its reach geographically and has a network round the country, wouldn't these charges come down going forward because then, you would not be paying BSNL an ADC anymore?

Mr. Pandit : See, it is like this. BSNL has ubiquitous presence. We will not duplicate it. It does not make economic sense to duplicate it. So, today we are actively discussing every other operator who has already some backbone infrastructure to share it. If Bharti, or Reliance, or BSNL have put fibre-optic cables all over, there is no point in Tatas again going and putting the same. If it were not possible to share, then we would do it ourselves.

EQTM: What is your vision for TTML? Where do you see the company five years down the line?

Mr. Pandit : Maharashtra (and Goa, put together) is the largest telecom circle in the country, whether it is fixed line or mobile. So, our vision for TTML is to take a leadership position in the next 3-5 year period. We want to among the top, and maybe the number one player, or leaving aside BSNL, the number two player in the telecom circle of Maharashtra. It would require an enormous amount of hard work, enormous amount of focus and customer service. But we will get that.

EQTM: Could you share with us the personalities and books that have influenced you the most?

Mr. Pandit : It is very difficult to say few people because enormous number of people have influenced my thinking, starting from my teachers, my parents and the people I interact with. So, it is very difficult to name a few personalities or a few books.

EQTM: What takes up your time apart from your work?

Mr. Pandit : Ever since I got into this industry, there has been extremely limited time. In the limited time I have, I try to read a few books, catch up with the new through magazines, and spend time with my family.

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