Tata’s Unending Quest For a Telecom Strategy
 |
|
Image: Punit Paranjpe/Reuters
|
|
Ratan Tata, Chairman of Tata Sons
|
n December 21, 2010, at 6:00 p.m., Ratan Tata met the newly appointed telecom minister Kapil Sibal at Sanchar Bhavan in the capital. The meeting — which came after several weeks of media accusing his publicist of trying to manipulate the previous telecom minister A. Raja — lasted for half an hour. In this meeting, Tata is said to have emphasised his most vocal demand to set right anomalies in the government’s telecom regulation and give his group a fair chance of doing business.
Ever since the taped conversations of Niira Radia were made public, Ratan Tata has been unusually vocal about his telecom business. In November last year, Tata publicly stated that a few telecom companies were hoarding scarce and expensive spectrum. That prompted Sunil Mittal, the head of India’s largest mobile phone operator Airtel, and Marten Pieters, head of the second largest player Vodafone Essar, to rebut his charges immediately.
Around the same time, Tata crossed swords with Rajeev Chandrasekhar, member of Parliament and the former CEO of BPL Mobile (now Loop), refuting what he called untruths and distortion of facts. He was referring to a letter Chandrasekhar wrote to him.
Why is Ratan Tata so upset? He is angry that his telecom business is looking to be lost inside the regulatory maze. He shouldn’t blame it all on the regulation though. While regulation is at fault, it is also a fact that his underlying business model is broken and needs some serious repair.
The business, today, is bleeding. The Tata group has so far invested more than Rs. 37,000 crore in the telecom business. Between its two companies, Tata Teleservices (TTSL) and the listed Tata Teleservices (Maharashtra) (TTML), the group has written off nearly Rs. 7,000 crore in losses, the biggest ever in recent times for the $80 billion group. Yet, last year (2009-10), it declared fresh losses of over Rs. 2,000 crore. Tata Communications, the third group telecom company which took over assets of government-owned VSNL, made losses last year after a large acquisition.
Having taken over the reins of the Tata group in 1991 from the iconic J.R.D. Tata, Ratan Tata is credited for several pathbreaking moves in the group, including the launch of Nano. The two flagship companies, Tata Steel and Tata Motors have grown several times under his leadership and have big international footprints.
The crucial question then is: Will Tata remain a significant, profitable player in the telecom space or will the investment go down as one of Ratan Tata’s worst ever business decisions? Kishor Chaukar, director, Tata Investments, who oversaw investments in the business, says, “Telecom is a core business for the group and we are in it for the long term.”
This or That
In planning for a core business, Tata’s thinking has not been easy to fathom. The group began by wanting to be a fixed line player. Later, it ventured into limited mobility wireless, then to full mobility wireless, and finally to dual technology. “Tatas have been half-hearted about this business. When Reliance went in for dual technology, they went the whole hog and took a pan-India license while the Tatas took only eight circles,” says an industry analyst. So how is Ratan Tata planning to revive the business?
Infographic: Sameer Pawar
The top management changes at Tata Teleservices offer some clues about the current thinking. Anil Sardana, the current CEO, credited with giving the telecom business some drive with his GSM push is going to head Tata Power, where he originally came from. N. Srinath, the current head of Tata Communications, will take over the reins from him.
Last year, a month before the launch of Tata DoCoMo’s GSM services, TTML’s managing director Mukund Govind Rajan moved to a new role in Tata Capital. Anil Sardana was given the additional charge of TTML, with a mandate to make support functions like HR and accounts shareable across the entities. But since Tata Docomo was being promoted as a brand distinct from Tata Indicom, it was necessary to set up a new customer facing organisation for the GSM business.
The Bombay House line is that Sardana is moving back to the power business as there was a legitimate vacancy after Tata Power’s managing director, Prasad Menon, stepped down. Sardana, too, says power is his first love. But Tata insiders read a different note on
the move.
A senior executive who has worked with Srinath says, “If Sardana can cut the flesh, Srinath can pare it to the bone.” Srinath’s express mandate is to take costs out and integrate the operations of all three companies: TTSL, TTML and Tata DoCoMo. Insiders reckon almost 2-3 percent of sales can be reduced. In itself that may not look like a big number but it can be a big thing for a company that’s running losses.
Single Page View
The surprising part is, Tata's are the one who did things right.
Is the group nimble and flexible as needed to be successful in such areas - or has it become too bureaucratic with older mindset from successfully operating in more stable sectors?
In your page 2, 9th para the article states:
'Airtel came to Delhi having a formidable set up in Delhi, Andhra Pradesh and Karnataka.' - needs little change.
