When he took over as managing director of the New Delhi Power Limited in July 2002, the company was running up losses of Rs 1,500 crore (Rs 15 billion) a year and service standards were abysmal. In two years Anil Sardana had turned it around.
The firm actually won the Asia Pacific Utility Association's 'change management' award. Sardana needs to do an encore in his new role as CEO and MD of Tata Teleservices. Not only is TTSL still in the red, the service could certainly be better.
A late entrant to the party, TTSL has, together with sister company Tata Teleservices (Maharashtra) nonetheless managed to notch up 20 million subscribers for mobile and fixed wireless services.
Between the two, they provide CDMA mobile telephony across 20 circles and have grown market share from a paltry 3.5 per cent in March 2004 to 9.7 per cent currently, of course on a very low base.
Now Sardana claims the Rs 4,000 crore (Rs 40 billion) TTSL will post an operating profit by March 2008 on revenues of Rs 6,000 crore (Rs 60 billion). "We should be cash positive by March 2009 and turn in a net profit in the following year," says the CEO. TTML, which operates in the Mumbai and Maharashtra circles posted a loss of Rs 315 crore (Rs 3.15 billion) in the year to March 07 on revenues of Rs 1,407 crore (Rs 14.07 billion), though it earned an operating profit of Rs 302 crore (Rs 3.02 billion).
Meanwhile, the Tata group has applied for a GSM licence and there is also talk of it teaming up with Richard Branson's Virgin Mobile, which wants to enter the Indian market. Does this mean the Tatas will once again operate in both the GSM and CDMA spaces?
"Wait and see," is all that Sardana will say. According to Saurine Doshi, partner, AT Kearney, while there aren't too many players worldwide that work with both technologies, there is nothing inherently negative in the strategy. Says he, "Sure, the company will need to set up fresh infrastructure but Indian companies are getting good at setting up large projects so that should not really be an issue.
Also, back office costs, frontend outlets and knowledge too can be leveraged." Others believe the Tatas want to access Virgin's technology to provide high end value-added services as also to use the Virgin brand.
In the meantime, TTSL has roped in Chlorophyll to rejuvenate the Indicom brand. However, the company's aware that better customer interface and a good product are more important.
"We will take voluntary fines if we don't deliver, "claims Sardana. TTSL's also rewriting its marketing strategy. Being a late entrant, the telco was left to cater for customers with a low income profile. That's why its ARPUs (average revenue per user) is perhaps the lowest in the industry at Rs 250, though it compares favourably with competitors on minutes of usage (MOU) at 400 minutes.
Now it wants to launch schemes targeted at different customer segments. "We will have devices, tariff plans and schemes that are designed for youth or for senior citizens and though some of this may have been tried out by others there will be more innovation,"the CEO explains.
TTSL also plans to woo enterprises with a host of managed solutions, especially since they fetch far higher ARPUs of between Rs 800-Rs 1,100 and margins of between 35-40 per cent. Business from this segment has been insignificant but should move up to 10 per cent this year and Sardana's hoping it will account for a fourth of revenues by March 2009.
Other telcos are already there with Bharti,for instance, deriving 23 per cent of its revenues from enterprises. However, as Doshi points out, more than the technology it's the infrastructure, processes and systems that are important. So given that all telcos are focussing on enterprises, it's not going to be easy for TTSL to gain share.
However, Sardana believes CDMA technology will have a clear edge when it comes to 3G services. "CDMA technology and phones are better suited for some of the solutions that can be offered," he says. However, according to Romal Shetty, executive director, KPMG, "CDMA may be more spectrum efficient and therefore require less resources but otherwise it doesn't really have any significant edge over GSM." Where Shetty believes TTSL is doing well is in value-added services. "They are probably one step ahead of the others in some segments of VAS such as gaming," he observes.
TTSL needs to build on the lead and make sure it betters its service. And also market its products more aggressively. Then alone can it hope to achieve its target of 45 million subscribers by 2010 or a market share of 12.5 per cent. Also as experts point out, profitability is as important as growth. As it is the company's profit margins are under pressure thanks to handset subsidies of between Rs 800-Rs 1,100. Unless it scales up quickly, it will simply not be able to ring in the right numbers.
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