CDMA is better than GSM: Sistema Shyam

BANGALORE, INDIA: Indian telecom sphere is all set to witness a tug of war with six new international telecom players set to enter the scenario.

Sistema Shyam Teleservices, a joint venture between Russia's Sistema and India's Shyam group, the only CDMA (code division multiple access) player of the lot, recently launched its services in West Bengal.

During an interview given to CIOL, Vsevolod Rozanov, president and CEO, Sistema Shyam TeleServices, said that CDMA is a better technology than GSM because it enables better utilisation of the frequencies available, and thus helps in bringing down the costs. Excerpts:

CIOL: The Indian metros and urban areas have attained saturation in terms of telecom density. So where do you see the demand coming from and for what?

Vsevolod Rozanov: If we have to grow fast, apart from expanding our footprint in new circles and getting new customers (first-time users), we have to wean away customers from the incumbents.

We believe there is a huge market for us to grow. While there are players who have the first mover’s advantage, there is still a vast chunk of existing individual users who will find higher value for money in our tariff and billing plans.

CIOL: What are your investment plans for India? What will be the focus?

VR: We plan to invest $5.5 billion in India over a period of five years. We will utilize most of this projected investment over the next two years for setting up infrastructure that will enable accessibility and better connectivity for mobile phone users.

We have already invested more than $1 billion in setting up our network. We have launched the brand in Rajasthan, Tamil Nadu, Chennai, Kerala and Kolkata. We are planning to launch services in Delhi by Q3 this year, and looking to foray into one circle every month.

We will eventually cover UP, Haryana and Maharashtra circles by the end of this calendar year. Thus, in the next nine months, the MTS brand will be seen in half of the 22 telecom circles across the country, achieving a pan-India footprint by mid-2010.

CIOL: Do you see a possibility of M&A going forward to meet the increased challenge? What is your take on infrastructure sharing among service providers to combat frequent network disruptions owing to issues like natural disasters?

VR: We are not aware of any significant player in the CDMA segment in India who is planning to hive off its telecom business.

We will have a combination of self-owned and shared infrastructure to ensure that we provide the best connectivity across the country. We already have tie-ups and agreements with various infrastructure companies across the country to ensure superior quality of service.

CIOL: How different will be your 'go-to-market' strategy?

VR: In Rajasthan, the key message of our campaign is to create a churn in the market through the slogan, “Badlo life ka plan” (change your life’s plan).

Today over 50 per cent of our subscribers in Rajasthan are not new customers, but those who have switched over from other mobile service operators. They are doing so because they are frustrated with the quality of the old incumbent networks, and are willing to try our non-congested network.

We do not see much difference between GSM (global system for mobile communications) and CDMA. Customers using CDMA technology are approximately one quarter of all. Given the size of the Indian market, this is not small at all.

We have been looking at whether we should wait until we are fully ready with CDMA data offerings or we should start building our customer base and deliver our data offers a bit later. We decided to go in for the second option. We will be coming out with the data offering soon.

CIOL: With several service providers in the frame, will the cost of service be brought down further?

VR: India is a highly price-sensitive market. Our pan-Indian strategy will focus on simplicity in all our marketing strategy. We will offer simple, very clear and understandable tariff plans for our customers. Our tariffs will be the lowest, with no hidden charges.

We have dropped the price of entry-level colour phones to Rs 999, and they come with six months of free calls and lifetime validity. The subsidy that we incur on every phone is going down as the price of phones is going down faster than the fall in new offers.

We will offer SMS at 50 paise unlike most other operators who charge one rupee. The tariffs can fall further, if the regulator makes the termination charge cost-based, which would be less than 10 paise a minute from the current 30 paise, the same can be passed on to customers.

CIOL: How do you see advanced mobile technologies - such as 3G, CDMA - gaining currency in rural areas as well, especially when India has very less wireless penetration?

VR: The advanced mobile technologies such as 3G have the potential to meet the digital divide between rural and urban India by penetrating into far-fetched areas, where fixed-line connectivity is sparse due to high deployment cost of infrastructure. 3G will not only alleviate the existing level of voice-based services, but also make Internet broadband access a reality for larger population.

3G will also fit well into the urban user’s plan. It will enable quality voice and address the pent-up demand for high-bandwidth data exchange on mobile phones and support high-speed Internet access on other portable devices.

The government has recognized 3G as the cornerstone for growth of the telecom sector and is expected to allocate the third generation on priority.

CIOL: What is being done to take the brand into the market?

VR: MTS is the eighth-largest telecom company in the world with over 100 million customers. In India, we are the sixth or seventh operator. We are using faces of models talking on the mobile phone to relate to the consumers and give our service the human touch. We have also decided to concentrate most of our advertising and marketing spend on local media, via regional language instead of English.

We have also recently rebranded our existing operations in Rajasthan, under the 'Rainbow' brand, to MTS. Rainbow was a regional brand limited to Rajasthan and what we needed was a pan-India brand name. Accordingly we painted the Pink City Jaipur to red - the colour of our brand.

The most important factor is the time-to-market - how quickly we could launch the brand across India in the next nine months. With MTS, the brand material, logo and specifications are all readymade and already available

CIOL: How do you look at the slowdown?

VR: Global economic slowdown is a business challenge for enterprises across the globe. However, Sistema is one of the largest public diversified corporations in Russia. We have sufficient funds to expand our operations, and launch our services on a pan-India basis.

India is one of the fastest growing markets for telecom, and has been relatively un-impacted by recession. As of now, the situation is under control, because the financial meltdown has not impacted Indian banks in a major way.

However, if the situation worsens, then we could be in a spot as we are not allowed to bring in foreign funds in the form of debt. We are allowed to bring money in the form of equity, but our promoters would like to have the flexibility to decide on what form they would like to pump in money into the company.

The Indian Government should consider relaxing the foreign investment norms, which will allow international players to bring in funds in the form of loan.

CIOL: What would be the newer trends in the Indian mobility sector?

VR: The year 2009 is expected to be an exciting year for the Indian mobile telephony market. With the Congress-led UPA (United Progressive Alliance) voted back to power, the sector can look forward to speedy auction of the long-awaited 3G spectrum.

A significant portion of the rural population will witness phased growth in first-time Internet access and welfare programs covering telemedicine, e-governance and distance learning - propelled by 3G mobile broadband and WiMax.

While the 3G network would infuse better services for subscribers and enhance revenues from VAS (value-added services) for operators, the introduction of MNP will offer users the convenience of retaining their mobile phone number even after switching between networks and operators.

Mobile payment and commerce for micro-transactions is also expected to attract greater user-orientation.