'We have economies of scale a new entrant cannot achieve'

Q&A: M A Madhusudan, CEO, Virgin Mobile India

A year ago, Virgin Mobile, the Indian arm of UK-based industrialist Richard Branson’s aviation and communication group, entered India as a franchisee of Tata Teleservices. In a first, Virgin designs, markets and services Tata’s offerings for the youth. Hit by the recent regulatory changes in telecommunications, M A Madhusudan, India head, talks to Ishita Russell about the reduction in termination charges and the road ahead for the company, now that it has completed a year in the country. Edited excerpts:

How was the first year?
We don’t reveal our subscriber base because there will be double counting of figures since they’re already included in Tata Teleservices’ numbers; every customer we bring in is counted as a Tata customer. However, our subscriber base is definitely more than a million.

What is the addressable market for you?
Of the total telecom market of approximately 300 million, 45 per cent is the existing youth segment or existing user base, plus there are 50 million more that are expected to join this segment in the next three years including this year. However, we are focused only on the urban youth. So, effectively it is 17-18 per cent of the entire market. At present, 70 per cent of our subscribers are existing users of mobiles.

You came with the offer of paying 10 paise a minute for incoming calls. Now that the regulator has reduced termination charges, how will you cope?
It has definitely affected our margins. However, the effect is not much, since our outgoing and incoming is almost equal. So if my 30 paise have gone down, my outflow has increased by the same amount. Our overall calls were initially more towards incoming tariff offering, since typically we have kids and college goers on our profile, people who give missed calls for other people to call back. But now it is neutralised.

Everyone is focusing on the youth.
We won’t diversify and dilute the property of the brand. Even after a lot of brands floating in the market, we have 87 per cent recall in a span of one year, and some of the brands don’t even figure in the youth segment. So despite all other operators in the market we are being seen as a youth brand. We don’t have any ambitions of dominating the market, we started this venture only to address a particular segment, which is not being addressed by one of the stakeholders.

Now that MVNOs (mobile virtual network operators) are allowed, would you consider a plunge?
We are not tempted, given the way MVNOs are being implemented in India. With three more operators coming in, there will not be enough space for an MVNO to try for an urban market.

How much competition do you foresee in the urban markets?
Any new entrant will have to make a lot of investments in infrastructure. We are working on an existing infrastructure, only adding to it. We have already found economies of scale that normally a new entrant would find hard to achieve. We will be able to compete with any new brand that comes into the market.

Tata is entering GSM. Will you come along? What about 3G?
Our partnership with TTSL is not technology-dependent, it is only a brand. So we have the opportunity to go for GSM. They will take time to establish their GSM network so we have time to take decisions. It definitely opens up much larger options. We would definitely be excited about 3G. Whenever it comes, we would be ready with our offering. We will not bid individually for 3G.

Do you have plans of getting into other forms of data connection?
We’ve just made an entry into the data space with USB dongles and data cards. We will not make much hype about this. We will go through our normal channel; it’s an add-on product. We want to provide a complete package to the consumers to cater to all their needs, this is not specific to the youth market.