Wired for growth

POUND WISE

Year ended

% Change 

Mar 31, 2004

Mar 31, 20 03

Telecom revenue195.6597.5359.5966 Other income1.855.0710.05448 Total income197.4652.57369.6477 Total expenditure192.6597.92308.1894 EBITDA4.854.6561.48-11 Finance & treasury charges43121.861.199 Depreciation60.7202.53205.36-1 Profit/loss (before tax)-98.9-269.68-205-32
Cheaper capital costs
As the last entrant in the wireless arena, TTSL has missed out on the cream of the customers in the metros and some of the smaller towns. But Amit Bose, president, TTSL, asserts that this is not a handicap.

 "We may be late but the lower incremental capital cost of around 25-30 per cent will work to our advantage," he says. With the roll-out, the capacity will go up from the existing five million to 10 million and TTSL has managed to cap the incremental capex bill at $80-$90 per subscriber.  Competitive pricing, customisation
TTSL hopes to capture marketshare by keeping tariffs attractive. "We plan to be about 20 per cent cheaper than our competitors for some time," says Bose.  But the competition is no less smart. GSM players, Bharti and Hutch have lowered the entry barrier - having launched the micro-prepaid in some cities for which the start-up cost is less than than Rs 100.  Bose says the differentiating factor will be the customised service. That strategy seems to be working. In the fixed wireless phone (FWP) segment, TTSL is the market leader with a customer base of over one million. One million subscribers have bought FWPs in FY2004, taking the total to two million.  The Tata firms managed to add more customers in recent months than Reliance (TTSL is reported to have added 2,00,000 customers in September against Reliance's 1,50,000). TTSL is banking on its closed user group (CUG) product, which allows communication between land, wireless and data for a fixed fee.  "This product is targeted at SMEs which find it cost-effective," explains Bose. Its 'push to talk' voice messaging product, soft-launched in Bangalore, is the latest technology upgrade.  The data portion of the package, which now accounts for less than 5 per cent of the ARPU (average revenue per user), is expected to contribute 15-20 per cent of ARPU in three years.  But, with Reliance proposing to bundle almost all possible services including cable, the Tatas will not find the going easy, especially since they plan to focus only on wireless.  Bose says he is targeting an incremental 20-25 per cent of the wireless market every year so as to hit a marketshare of about 20 per cent in five years.

 The pie is big and growing
The reason why the Tatas could pull it off is simple. India is a huge and growing market and in FY04, added close to 20 million wireless subscribers, a 160 per cent growth over FY03. The current subscriber base is close to 40 million and expected to touch 200 million by FY08.

 According to Amitabh Chakraborty, research head at Kotak Securities' PCG,