Tata Tele gains from cost cuts

Updated: Mar 28 2005, 05:52am hrs
Tata Teleservices (Maharashtra) Limited (TTML) was incorporated in March 1995 as Hughes Ispat Ltd, and was later renamed Hughes Tele.com (India) Ltd. in 2000. Consequent to takeover of the company by the Tata Group, the company has been renamed TTML.

The company provides fixed and mobile services within the states of Maharashtra (including Mumbai) and Goa. The company achieved financial closure for its appraised project in September 2003. The project cost was estimated at Rs 33.80 billion, funded largely by equity (Rs 15.53 billion) and debt (Rs. 13.50 billion). The balance fund requirement of Rs 4.77 billion has been met largely from vendor financing. By FY2004, TTML had spent approximately Rs 30 billion on the project.

The provision of fixed telephone services constitute the largest portion of TTMLs business. By January 2005, TTML had a fixed network subscriber base of 0.66 million. It launched CDMA mobile services in 2003 and had a subscriber base of 0.22 million by January 2005. With increase in telephone subscriptions, TTMLs revenues have increased at a significant rate-from Rs 2.53 billion in FY2002 to Rs 5.98 billion in FY2004.

Although TTML has benefited from cost reductions and economies of scale, higher financing costs (because of capital expenditures), and higher marketing costs on launch of CDMA services have resulted in operating losses of Rs. 4 million in FY2004. Net losses have also increased from Rs 2.05 billion in FY2003 to Rs 2.70 billion in FY2004. During 9MFY2005, TTML reported revenues of Rs 5.91 billion, representing a yoy increase of 39%. However, significant increase in administrative & marketing costs, and increase in depreciation charges resulted in an increase in net losses-from Rs. 1.79 billion in 9MFY2004 to Rs. 3.50 billion in 9MFY2005.

Apart from consolidating its product offerings in the conventional voice telephony services, TTML is also expected to increase its presence in data, content and other value added services.