Marketing Communication Stratergies of the Company

7/31/2019 Marketing Communication Stratergies of the Company

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In early 2001, Srinivasa Addepalli, then a senior consultant with the Tata Strategic

Management Groupthe consulting division of Tata Industries Ltdwas among those

asked by Tata Sons Ltd, the holding company of the $83.3 billion Tata group, to list why

the group should not bid for the state-owned Internet and international long-distance

company Videsh Sanchar Nigam Ltd (VSNL) and instead build its own international

long-distance business. After all, this would be less expensive to roll out since licences

were cheap.

It was tough since I was in favour of bidding for the deal, recalls Addepalli. The group

did bid for VSNL and bought a controlling stake in VSNL in the following year. On 13

February, as the Tata firm prepares to celebrate a decade of this public-private

partnership in which the government owns a 26% stake, Addepallinow senior vice-

president (corporate strategy and marketing) of Tata Communications Ltd. (the

new avatar of VSNL)is busy charting out the companys growth strategy.

Addepalli is glad the company has expanded with about 75% of its revenue coming from

overseas, while getting into new areas like video services, cloud services, mobile

broadband and Internet Protocol-, or IP-, based servicesthe new big bets. This, even

as Tata Communications was saddled with around Rs 7,350 crore net debt as on 31

December and is yet to resolve the 773 acres surplus land issue with the government,

which prevents it from raising fresh equity.

Till 2002, VSNL had a monopoly in the international long distance (ILD) market (the

commoditized voice business contributed 98% of revenue in 2002), which guaranteed

profit. But that changed when the monopoly was terminated two years ahead of

schedule in April 2002, forcing the management to change its business model, both in

India and overseas as companies such as Bharti Airtel Ltd and state-run Bharat Sanchar

Nigam Ltd started denting the market.

The new VSNL management started a clean-up act by trimming the workforce,

ushering a cultural change to sync it with the Tata group, empowering senior employees

to shed their bureaucratic way of thinking and creating new revenue streams.Indeed,

VSNL had its strengths. By virtue of being listed abroad, the company had financial


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discipline and transparency. It also had a pool of young talented engineers with

knowledge of Internet-based technologies. What VSNL lacked was marketing skills, a

much stronger customer focus and market orientation, and determination to compete in

the market placethings the Tata group had.

Globalization drive

The company initiated a globalization drive, fuelled by acquisitions and diversification

away from voice. In 2003, it opened offices in the US, the UK and Sri Lanka, with the

international division based out of Singapore. A year later, it acquired Tyco International

Ltds global network with its undersea optic fibre cable network that spanned 60,000km

for $130 million and began providing data services to global customers.

In 2006, it acquired Teleglobe International Holdings Ltda provider of wholesale voice,

data, Internet Protocol and mobile signalling servicesfor $239 million, making it one of

the worlds top five voice and data providers. The acquisition added at least $1 billion in

revenue, tripling traffic carried to 18 bill ion minutes a year.

In early 2008, it integrated all operations under the Tata Communications umbrella,

announcing it would invest more than $2 billion over the following three years to drive its

global expansion. This was followed by the acquisition of majority stake in South African

communications network operator, Neotel (Pty) Ltd. The company then reorganized

itselfsetting up global business units based in Singapore (data services), Montreal

(voice services) and India (Internet broadband).

Also, partnering with Tata Consultancy Services Ltd (TCS), the company got into

managing hardware, software, networks and applications for companies. It drew upon

the resources of TCS for IT and Tata Teleservices Ltd (TTSL) for domestic wireless

networks.

N. Srinath, who headed Tata Communications till January 2011 and currently is the

managing director and chief executive of TTSL, played a major role in transforming

VSNL from a domestic monopoly to a global telecom major in just five years.

Being part of the transformation of VSNL was one of the most exciting and challenging

periods of my life. Tata Communications has built the assets, capabilities and reputation

to be regarded as a global challenger, Srinath says.

From being predominantly an Indian wholesale voice business to a global one, it has

become a diversified provider of connectivity and managed services to service providers

and corporate customers. In several key segments such as wholesale voice, submarine

cable capacity and Internet bandwidth.


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Tata Communications has a global footprint now. VSNL had just 80 carrier customers in

2002. Ten years later, Tata Communications has around 1,600 clients, at least 50,000

enterprise customers and nearly 7,500 employees1,000 of whom are in South Africa.

Its ILD traffic has increased to around 45 billion minutes per annum, from 3 billion

minutes in 2002, and bandwidth has increased from 500-700 megabits per second or

Mbps to 20 terabytes (almost 3,000 times more).

According to Vinod Kumar, managing director and chief executive officer of Tata

Communications, in a world that is seeing several disruptionsbe it in geopolitics,

economy or businesstechnology is bound to make a huge difference. What I find

fascinating is the impact that high-definition video conferencing is making on the one

end and 140 characters are making on the other end. The Tata Communications story is

a great example of how a public-private partnership can create real business value, not

just in the Indian market but globally.

Big bets

The company is betting big on the cloud services business, expecting a turnover of $250

million in the next couple of years. Another major focus is on the media and

entertainment sector. The third growth driver is its South African telecommunications

network operator, Neotel.Partnerships are helping, too. In July 2010, Tata

Communications and Google India announced a collaboration to increase the managed

services portfolio. Tata Communications is betting on a future that will be significantly in

variance to the current technology paradigm. As the new trends, such as cloud

computing, emerge and establish themselves as the new orthodoxy, it will be well poised

to dominate the new market structures, says Alok Shende, founder of research

firm Ascentius Consulting. Describing Tata Communications partnership with Google

for Google Apps as the right move, Shende says the market has turned to close to


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200,000 licences per year in 2011.

More recently in January, Tata Communications, together with nine global service

providers, announced the launch of the Global Meeting Alliance of leading telecom

providers that have aligned to interconnect (on a revenue-sharing basis) their respective

business video communities. Leveraging Tata Communications industry-leading number

of inter-carrier agreements, customers of the Global Meeting Alliance members now

have access to an international Telepresence network of third-party video endpoints, as

well as the largest global public Telepresence room network consisting of 40 public

Telepresence suites in 22 countries.

By making B2B calls easier and interconnecting different carriers, the Global Meeting

Alliance will drive the usage of videoconferencing and Telepresence systems, enabling

customers to see faster and higherreturns on their investments, says Andrew W. Davis,

senior partner and co-founder of market research firm, Wainhouse Research.

Nevertheless, analysts remain concerned. For the year ended 31 March 2011, Tata

Communications posted a consolidated revenue of Rs 11,932 crore but a net loss of Rs

854.19 crore (it was Rs 597.74 crore for year ended 31 March, 2010). The companys

consolidated reserve and surplus for the same period stood at Rs 3,307 crore.

A November 2011 J.P. Morgan Chase & Co. report, afterTata Communications Q2

(July-September) results, stated that Neotelwhich had so far been a drag on earnings

before interest, taxes, depreciation, and amortization (Ebitda) (operating profits) has

turned around and profitability in the core business, too, improved in the quarter (Q2,

2011). However, continued weakness in the voice revenue (47% of total), which is just

about offset by the strong growth in data, keeps us from turning more positive on the

name. Furthermore, we await evidence of sustainability of and increase in cost

efficiencies.

The report listed the key upside risks as monetization of stake in Tata Teleservices and

sale of surplus land. It listed the key downside risks as meaningful slowdown in voicenot offset by growth in data, and increase in expenses reversing the margin

improvement.

The scene improved in the third quarter when Tata Communications consolidated gross

revenue at Rs 3,604 was 19.5% higher than in the same quarter last year. But it

reported a consolidated loss of Rs 153.06 crore, against a loss of Rs 181.38 crore

during the same period last fiscal. The companys global voice services contributed 55%

to its total revenue. Global data services contributed 45% to the revenue in Q3.

Besides, the unlocking of the surplus land holdings of VSNL hasnt happened for adecade because of which returns to shareholders, too, has been poor. The stock has


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underperformed the benchmark Sensex in the past 10 years, offering a 2.88% annual

return against 17.7% of the Sensex. Till the time issues related to surplus land get

resolved, the company will not be able to raise funds by issuing fresh equity and tackle

its high debt

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Marketing Communication Stratergies of the Company