The Tata group is one of the country?s largest conglomerates, with a presence in sectors ranging from salt to software. In most of the sectors it has a presence in, its ranking is either number one or among the top three. So while Tata Steel now ranks third in terms of capacity in the domestic market and TCS is the largest IT firm, Tata Motors is the largest commercial vehicle firm?even if only cars are accounted for, its pecking order is at third. In hospitality, Indian Hotels is the country?s largest chain. However, when it comes to telecom, the company?s foray has not only been troubled but also marked by several flip-flops, which may be a reason why the group?s ranking here does not match with the ones in other sectors.
It?s only in very recent times, after having Japan?s DoCoMo as an equity partner, that the company?s telecom arm, Tata Teleservices Ltd (TTSL) started making its mark, even forcing incumbents like Bharti Airtel and Vodafone-Essar to follow its per-second pulse billing rate. However, since the name of the Tatas? public relations firm Vaishnavi and its promoter Niira Radia has also been dragged into the allegations surrounding the 2G scam, TTSL?s celebration has been somewhat marred.
Whether the alleged advice given by Radia and former Trai chairman Pradip Baijal to the Tatas, with regard to their telecom venture, bore fruit for them is too recent an event to be analysed. However, it would be appropriate to survey the Tatas? foray into the telecom sector way back in 1995 when it was opened up to the private sector as it clearly shows that the company always lacked a clear and farsighted approach towards the business. Though one does not know prior to Radia-Baijal duo who else advised the group about its telecom business but it is clear that the advice was not worthwhile.
The Tata group?s foray into telecom has been as old as Bharti?s Sunil Mittal?s, the only difference being that they were much bigger than Mittal then! In 1995, in a joint venture with Bell Canada, Tatas bid for several circles but succeeded in only getting Andhra Pradesh. Like the rest of the industry, by 1997 they realised that the business model, based on a bid they had placed in 1995, just did not work out. Tatas had another problem since they had, along with a handful of other companies, also acquired a fixed line licence in Andhra. This was the first wrong choice as fixed lines were not the future of telephony, as is quite evident today.
Today, 17 years later, the country?s total mobile subscriber base is close to 700 million, while fixed line subscriber numbers languish at around 30 million.
Group chairman Ratan Tata may label the switchover by the NDA government to a revenue-share mechanism in 1999, in the form of a new telecom policy as a bailout for the operators then, which may have cost the government around Rs 50,000 crore. However, Tatas were themselves beneficiaries of the bailout, like other operators, as they were also able to migrate from the licence fee regime into a revenue share one.
Close to 1999, the Tatas approached Birla-AT&T for a three-way joint venture. The three partners launched a JV called BATATA (now Idea Cellular). Each partner had 33% equity and, to begin with, just three circles of operation?Maharashtra, Gujarat and Andhra Pradesh. This business slowly picked up.
Then came 2001 when the government came up with the concept of limited mobility licences. This was supposed to allow fixed line service providers to operate with some limited mobility within a service area. Suddenly, the Tatas jumped the bandwagon from GSM and joined the limited mobility queue. The advantages available here were lower entry based on fixed line price rather than auctions, preferential spectrum allotment and like fixed line, it had ?caller party pays?.
Later, when the government held auctions for the fourth batch of mobile licences in 2001, the uncertainly within Idea was so high (they didn?t know whether the Tatas would stay or go) that they got merely one circle?Delhi. If the Tatas had stayed on, it would have been a turning point for Idea. By comparison, Bharti bagged nine circles at a mere Rs 900 crore in the auctions.
When the GSM operators were fighting the limited mobile players in 2002, which was viewed by them as nothing but backdoor entry into full mobile services by paying a lower licence fee, the Tatas threw in their bit with the limited mobile operators like Reliance Infocomm. Later, the then telecom minister Arun Shourie allowed limited mobility to go fully mobile under a unified access service licence (UASL). The Tatas thus became a full-blown CDMA mobile operator. However, they continued to hold their stake in Idea, along with the Birlas, which was a GSM operator. The year 2006 saw a public spat between the Birlas and Tatas, with the former alleging that the Tatas? heart was not in GSM but in CDMA so they should exit Idea as it was hurting the company?s growth. Thus, the Tatas ended their GSM chapter.
The story here onwards becomes even more interesting. By 2007, much like Reliance, the Tatas realised that subscribers were simply unwilling to accept CDMA due to problems with the technology and again like Reliance applied for GSM licence/spectrum. Here, Raja aided them through the dual technology policy of October, 2007. After entering GSM, the Tatas were able to restructure their business?by inviting investment from DoCoMo and launching their brand afresh. It is only after 2009 that the Tatas? telecom business has become competitive and is worth considering among the top 5 brands.
So, in their telecom venture, not only did the Tatas make wrong technology choices and strategic moves but such steps got corrected by what Ratan Tata calls policy flip-flops.
?rishi.raj@expressindia.com