Tata Tele to Merge CDMA and GSM Ops, Job Cuts Likely

Mumbai, India (PressExposure) July 28, 2011 -- Recast comes 20 days after Bharti announced its revamp plan

The telecom unit of the Tata Group has decided to combine two businesses that provide mobile services using different technologies, raising fears of job cuts in an industry marked by low tariffs and falling profits. In a circular issued on Sunday, Tata Teleservices (TTSL) announced in what it described as the "unification" of two divisions offering services based on CDMA and GSM, two rival technologies.

"This restructuring may drive efficiencies but could end up making job positions redundant. Our estimate is 15% of the employee strength, which includes employees eased out on the basis of non-performance. CDMA employees will be impacted the most due to this restructuring," a senior TTSL company official said. He spoke on condition of anonymity because of the sensitivity surrounding job cuts.The restructuring comes 20 days after India's largest telco by market capitalisation and revenues, BhartiAirtel, announced its biggest streamlining exercise in a decade to cut flab and drive efficiencies. TTSL operates CDMA business under the brand Tata Indicom while offering GSMbased services under the Tata Docomo brand. NTT Docomo, a Japanese telecom company has a 26% stake in TTSL, that has 11,000 employees. The Tata Group has the remaining 74%. Entrepreneur C Sivasankaran is also a minority shareholder. The Tata Teleservices spokesperson declined comment.

The internal communication, sent to all employees on Sunday, talks about a unified structure combining GSM and CDMA that collapses all circles under four regional heads: Vineet Bhatia (west & upper north) Mahesh Thampi (east and UP), YatishMehrotra (south) and AjitChaturvedi (Delhi and Rajasthan). They will report to Deepak Gulati, president, who is in charge of mobility nationwide. These four regions will have between them 15 mobility business units, carved out by combining circles, roughly equivalent to a state.

The heads of two search firm heads, who track the telecom sector, said at least 8,000 job positions across mobile companies will be culled by the end of the year as more companies streamline operations and cut layers to become agile and respond to market dynamics faster. They spoke on condition of anonymity.

"The telcos are rightsizing the mainstream mobility business due to excessive layers at the top and over staffing at the mid and junior level. Certain clusters such as mobile banking, telecom infrastructure companies, valueadded services and specialised 3G business divisions are hiring,'' R Suresh, MD, StantonChase said.

The possible job cuts at TTSL and a similar exercise by BhartiAirtel could also provide the trigger for parallel moves by rivals, many of whom are confronting similar issues - a high debt burden, slowing growth and high marketing spends amid cutprice tariffs.

TTSL with close to 93 million subscribers, has the lowest number of active customers among private established operators, according to data from the Telecom Regulatory Authority of India. Less than 50% of the GSM and CDMA divisions are active.

Increasingly, telcos are focusing on cost efficiency since tariffs are the lowest in India. Average revenue per user - a key indicator for operational income - is also among the lowest in the world.

Apart from restructuring, mobile phone companies have also started hiking call rates for the first time in three years. Tata TeleServices, which had unleashed a price war with its per-second billing-based GSM offering about two years ago, recently doubled STD call charges for subscribers who have been with them for a year and raised local and national SMS charges by 67% and 25% respectively. Last week, BhartiAirtel increased call tariffs by 20-50% in some regions, a move that may change market dynamics, as it marks the first hike by an incumbent operator in three years.

Earlier this month, BhartiAirtel undertook a restructuring exercise aimed at cutting costs. The company restructured all businesses into two verticals - one that will sell to individual customers while the other will sell to enterprises and businesses.


About RCom

Reliance Group's flagship company, Reliance Communications, is India's largest private sector information and communications company, with over 100 million subscribers. It has established a pan-India, high-capacity, integrated (wireless and wireline), convergent (voice, data and video) digital network, to offer services spanning the entire infocomm value chain.

Other major group companies - Reliance Capital and Reliance Infrastructure - are widely acknowledged as the market leaders in their respective areas of operation.

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Press Release Submitted On: July 28, 2011 at 2:37 am
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