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The rural sector is characterized by around 40% churn rate, which will give us an opportunity: Rozanov

Shyam Telelink, a joint venture between Russia-based Sistema and Indian group Shyam, has a pan-India license for CDMA services. Shyam Telelink CEO Vsevolod Rozanov tells V&D about the strategic tie-up with Mobile TeleSystems of Russia, a Sistema group company, and discusses how the alliance can help them in adapting to the Indian scenario. He says 3G may not help the operators strike gold, at least in the first few years. Excerpts

You have recently launched services in Rajasthan and set a new record by adding one lakh subscribers within a month of the launch. How do you plan to move ahead?
The plan is to roll out pan-India network within the next six quarters. We plan services in one or two circles per month in order to be done with by mid-2010. We plan to launch services in southern circles of Tamil Nadu and Kerala in the coming quarter. Four to five circles per quarter will be launched in sequential order. We are targeting 30 mn subscribers within four years.

The Indian market is one of the most competitive in the world characterized by low ARPUs and high initial investment. How do you plan to survive and thrive in this scenario?
Low ARPUs in the Indian telecom market does not prevent market leaders from having their margin of 40% plus. It is all about scale. The penetration is really low, we believe that newcomers, including us, do have the chance of a fair share in the market to get scale and make business viable. For us the issue is not ARPU, the issue is the number of subscribers, as the penetration here is still one of the lowest in the world.

Coming back to attracting subscribers, we will continue to offer what we are currently offering in Rajasthan. The tariff plans are simple and honest. We tried to keep the tariff plans as simple as possible. We make sure that the customers actually pay for what they see, so there are no hidden charges, no fine prints, etc. It is a very straight forward, simple, understandable and bold tariff plan.

Would you be focusing on the rural segment, which has at one of the lowest penetration levels?
It would be natural for new operators to focus on rural segments where the penetration is low. At the same time, the rural sector is also characterized by one of the highest churn rate of about 40%, according to industry statistics. This high churn rate also gives us an opportunity. Our focus won’t be totally on rural subscribers but we would also be looking at getting subscribers in the urban areas. Apart from that there is certain advantage in attracting the urban customers and anyway we have to build a network to be seated. We would be spending around $5.5 bn in the Indian market.

Will you be competing on price?
Well, that is the destiny of all the new players and that becomes the strategy.

What are the advantages of being a new player in the present scenario?
We clearly have three strong advantages. First, us being a CDMA player; we have an opportunity to build a much more effective network in terms of capex which would enable us to provide broader coverage at lower cost. For new operators it is important because we will be getting lower ARPU subscribers. While I have already said ARPU is not very important, the subscriber coming to us will not be the highest ARPU ones. Second is our ability to tap on the experience of the parent company from Russia because the parent company Sistema owns one of the biggest mobile operator called MTS, which handles over 90 mn subscribers. We have an unlimited access to all the practices, techniques, policies, etc and we will definitely tap on their experiences. We do not need to invent many things. Also, our ability to build our business by taking into account learnings from other operators gives us an advantage.

We have a lot of disadvantages also, of course. But our biggest strength is that we do not have anything behind us and we can build our business best according to the Indian expectations now. The most effective way is that we can start from scratch. For the same capex we will be able to give bigger coverage.

There is an industry perception that GSM grows faster than CDMA? Do you think CDMA players will prove to be an advantage for you?
Yes. I am very confident that CDMA has a future in India because this is a very efficient technology and there is still a significant population not covered. There is huge area to be covered and this should be covered efficiently.

How are your services going to be different from what is already available?
Right now, more or less all operators have similar services. At this stage I am confident that for the next few years voice will still be the key offering in the Indian market. There are so many people who still do not use mobile phones. With marginal increase in penetration there can not be 100% increase in data. Data will be undoubtedly growing much faster, but the share will be a small portion of the overall market as many people still have the very basic need to be connected.

Apart from that, QoS has huge room to differentiate. We are aiming to invest in quality of sales personnel and people who are in touch with the customers. Here we have an opportunity to learn how not to make the mistakes others made.

What are your plans for 3G? Do you think 3G has a future in India?
We haven’t made up our mind on 3G yet. We are considering scenarios of development and business plans. 3G will be an important part of the market, but I don’t think people will be able to make money on this at least in the short term. However, given the extreme level of fixed line penetration and growing demand for broadband in India, a certain portion of customers for whom data will be critical will be able to afford not only pure voice but also broadband. People are likely to go for mobile broadband rather than fixed.

What is your take on mobile number portability?
Definitely, we as a newcomer would be interested in such an opportunity. For us it is more of an opportunity than a threat. However, looking at the experience of the other markets the influence on the change in their market shares wasn’t very dramatic. For us it may be an opportunity which we did not take into account while drafting the business plan. I don’t think it will lead to major change in shares of the market players.

What challenges are you facing as a new entrant?
As a new operator it is challenging to make sure we compete with bigger brands which share confidence with the subscribers in all these years of their lives. Coming with low tariff is not enough. It is very important to convince people that the operator is trustworthy and reliable and we are looking at a new approach to communication for the same. We have recently hired Satchi&Satchi as our communication partner. Our communication strategy will basically strive to communicate simplicity and honesty message to our subscribers. We will soon launch our TV commercials.

Heena Jhingan and Gagandeep Kaur

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