| Sistema Shyam Teleservices is confident of calling the shots.. |
We want to offer cloud services ourselves at some point in time.
Cheenu Seshadri
Hard to tell if it is innate or a rub-off of his company's aggressive culture, but talking to Cheenu Seshadri leaves you feeling as though you have just interacted with a pugilist on the prowl. The Chief Strategy Officer at Sistema Shyam Teleservices Ltd (SSTL) has no compunctions about giving his competitors a jab between the ribs as he talks about either the superiority of his company's technology or its business strategy.
MTS, the brand under which SSTL offers its telecom services, will be “ready as a viable alternative” when the “GSM guys” roll out their networks, says Seshadri. “Ready” is perhaps the key word because the company needs to be that, to indeed ready the capital market for its impending IPO.
With 6 million voice and 2,00,000 data card subscribers under its belt, SSTL, the Russian company that strode into the Indian market with a $2-billion expenditure budget, believes it has the foundation to build a “data-centric” business on.
In an interview to eWorld, Seshadri explains how the company intends to do it. Seshadri is a B.Tech in Mechanical Engineering from IIT-Madras and holds an MS in Industrial Engineering from the State University of New York. Prior to joining SSTL, Seshadri served as Vice-President, Strategy Office at Motorola, and earlier, with Bain & Company, a global management consulting firm based in Atlanta. Excerpts:
You recently launched three smart phones and have promised you will bring your services on Blackberry and Android devices. What is the idea?
India is predominantly a GSM market. On the CDMA side, there are only a dozen of phones on the ‘open market'— phones that you can buy in the market and put a CDMA SIM card. On the GSM side, there are hundreds of models. Qualcomm, which works with all the vendors, has said that there would be more than 40 (CDMA compatible) models in the open market by December. But until it happens, we have to (bring in phones for our subscribers.)
CDMA is superior in terms of spectrum use and download speeds. We want to be ready in the market when the GSM players launch their 3G operations. Especially, when MNP (mobile number portability) comes, we want to be a viable alternative. That is why we are launching these phones.
What is your strategy?
Our strategy is data, data and data.
In September of last year, we shifted ourstrategy, going from ‘carpet bombing' to being ‘data centric'. We decided that our CDMA technology's advantage is in data, India is a spectrum-starved market, India does not have 3G — in September 2009, 3G was at least a year or year-and-a-half away. Voice tariffs were going down — in 2009, voice tariffs were down 35 per cent. By August 2009, we had launched our services in five circles — Rajasthan, West Bengal, Kolkata, Tamil Nadu and Kerala, and Bihar. We knew the quality of our subscribers and the ARPUs.
Unfortunately we cannot call this 3G, we don't have 3G licence, but worldover, EV-DO REV A is 3G. (EVDO stands for ‘Evolution Data Optimised' and is a mobile broadband technology. Rev A is the latest version that allows high-speed data downloads, upto 3.1 mbps). We are at 800 MHz and that affords us the ability to roll it out far beyond anyone with 3G spectrum with 2100 MHz now, or a year from now, or even two years from now, just because of the sheer number of BTSs they have to provide. When the GSM guys roll-out their 3G networks, none of them will be able to launch nation-wide coverage. We can offer our services in all 23 circles. Of course, we are not present in all of them yet, but will be in more cities than our competitors — GSM or CDMA.
But the technology advantage is one that you share with other CDMA operators, right?
Of course. However, the others (Tata Teleservices and Reliance Communications) are two-technology players. The amount of investments they have to make on the GSM side, and now on the 3G side are immense. One of them has 3G licence for 11 circles and the other one in nine. Though we started nine months behind them, we have gone far beyond them in terms of coverage.
You say your strategy is data-centric. But ‘data' would presumably ride on ‘voice'. Is it correct to say that you should first have voice customers to sell data to them?
That may be true for incumbent players. For players such as Bharti Airtel, with 5-7 per cent of total subscribers as high ARPU post-paid subscribers, voice may be bread-and-butter business, but not for greenfield operators such as ourselves. We can bundle the two. We are not abandoning voice, we can't abandon voice, but a vast majority of our profits, 100 per cent of our EBIDTA margins, even three years hence, will come from data. For 3G operators, voice is not a super-profitable business.
With there being no profits in voice, data-centricity will be the strategy of all players in the market. What would be your USP?
We already have high-speed data coverage in more cities than anyone else. We provide the service in 52 cities. Tata is in 37, Reliance in 40. In the last six years, we have invested more in terms of geographical coverage than both of them combined. And we will double that by the end of the year, now that the informal ban on Chinese equipment has been removed. (MTS uses ZTE and Huawei equipment).
We have devised an ‘attack plan'. I can't give you the details now, but in broad terms, we believe other players are not going to be able to go after data card business in a big way, because of spectrum crunch. They only have 5 MHz spare spectrum on 2100 Mhz which is the 3G spectrum that they won, so they cannot load up hundreds of thousands of data subscribers, because these subscribers use a lot of data. Our subscribers use 5-6 GB per month.
They (GSM players) have to relieve congestion on their 2G spectrum. What we believe, and time will tell, is that they will move a lot of higher ARPU subscribers over the 3G on the smart phones — that is going to be their focus. That is why we are launching these smart phones now, so as to be ready.
Our USP is the largest high speed data coverage in the country. The 3G players on 2100 MHz cannot go to city number 150 — they will have to put three times the number of base stations (as CDMA players).
The GSM players say they will address the data market through GPRS.
Aircel and Airtel are the biggest players in GPRS and EDGE. Their VAS and data revenues is roughly 11-12 per cent of their total revenues on the smart phones. On data cards, it is not even a viable option now that EVDO REV A has come. So, the best performer in the market has been able to get 10-11 per cent of revenues. If the other players are able to replicate the success of the market leaders, they will get 10-11 per cent from data.
But even in your case the contribution of data to total revenues is 12 per cent, is it not?
Yes, but it is growing at 4-5 times rate of voice revenue growth. And, the 12 per cent is only from data cards business. Our total data contribution is 18 per cent — 10 per cent from data cards and 8 per cent from VAS, which is what is counted as data by TRAI.
A few months ago, your company opened a data centre in Chennai. Could you not have opted to take ‘cloud services' rather than invest your own money in data centres?
We want to offer cloud services ourselves, at some point in time we will do that. We will make that a standalone business model.
But to offer ‘cloud services' would you not need a much bigger server farm than the one you have now?
If the business warrants it, we will build it. See, who are the people who build cloud services? Global (telco) operators, and to a small degree Microsoft and Google. Basically, people who have a need to manage a lot of data. For any operator who is data-centric, going towards ‘cloud' is a natural evolution. When we will get there, what kind of investments we will have to do, is too early to say, but it is very much in our minds.
mramesh@thehindu.co.in
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