Date:09/02/2006 URL: http://www.thehindubusinessline.com/2006/02/09/stories/2006020903850400.htm

Back Tata Teleservices Maharashtra — `Cash profit in Q3 flows from new biz strategy'

Kripa Raman

Mumbai , Feb. 8

TATA Teleservices Maharashtra Ltd (TTML), the listed subsidiary of Tata Teleservices Ltd, ended the third quarter of this fiscal with an EBIDTA of Rs 33.58 crore against an EBIDTA loss of Rs 51 crore in the year-ago period.

Mr Charles Anthony, who was appointed Managing Director at TTML roughly a year ago, talks about how the company followed its operational efficiency plans.

Was reporting a cash profit and positive EBIDTA part of a planned agenda or did it just happen because the market looked up?

When we started 12 months ago with the new management team we had a specific agenda to become the market leader in Maharashtra and to attain operational efficiency. We were EBIDTA negative. We wanted to finish the year with a cash profit and at the same time expand our network.

How was that achieved?

We had 8 lakh subscribers, by the end of the third quarter we were at 1.6 million. Incremental market share wise, we were in the single digits and we used to be the fifth or sixth; we now average 20 per cent every month and are the first or second. Our Q3 revenues were up 52 per cent year-on-year.

With the non-stop mobile offer we pioneered, our additions of typically 1,500 subscribers a day went up to 4,000 a day.

But did not falling ARPUs and the non-stop offer affect margins?

ARPUs (average revenue per user) came down from Rs 824 to Rs 634, which is still a reasonably good number in the industry. Our operational efficiency programme brought down our cost per subscriber to Rs 562 from Rs 1,100 a year ago. Our voluntary churn is 0.5 per cent; with non-stop it becomes very difficult to measure involuntary churn.

We started site sharing initiatives, brought down power consumption, renegotiated rentals for our sites, shut down unwanted offices, houses. Earlier, we had 300 agencies doing our work. Now, we have six which give us more business. They do our order entry, installation and collection on a commission basis. We brought in automation, employer certification and training programmes.

We had too many people and reduced our manpower. Everything non-core we outsourced end-to-end. We have a franchisee model for the rest of Maharashtra. We are looking at equipment vendors too from an economical standpoint.

From a negative 25 per cent EBIDTA margin we bought it up to a plus 12 per cent margin. We made a cash profit in the third quarter. In the next 2.5 months, we will end up with a cash profit for the entire year.

When will you show a net profit?

We have a new task force to look at our net profit; the team is putting a plan together.

What will be your key attractions, after the non-stop offer?

Walky has powerful potential. We are trying to say that you can use this to roam anywhere, also you get the lowest tariff in the country. That is our way of bridging rural India. We launched it two weeks ago.

We also have a strong wireline base, with 75 per cent of the enterprise market share in Mumbai, this is a very stable customer base and ARPUs are very good. We are expanding our leased line as the business has picked up. We will partner with VSNL too.

We would spend another Rs 300 crore to Rs 400 crore on copper, expanding our reach in Nashik, Nagpur and Pune.

For how long will TTML and Tata Teleservices continue as separate entities, does not a merger make sense?

Merger is definitely on the cards, either reverse merger or otherwise. But nobody knows when.