THE TITANS : (From Left) Anil Ambani , Ratan Tata, Sunil Bharti Mittal and Kumar Mangalam Birla. These unlikely combatants are locked in a battle to manipulate public policy, jostling between themselves for superior positions, mounting expensive advertising campaigns and launching aggressive marketing warfare.

It’s a strange line-up. In one corner are the scions: the youthful and thoughtful Kumar Mangalam Birla, a fourth-generation billionaire, and his estranged but one-time ‘uncle’ Ratan N. Tata. Then there is today’s marathon man, Anil Ambani, and the not-so-new kid on the block, Sunil Bharti Mittal, the only one of the original telecom entrepreneurs who has survived to make it into the big league. Squaring off with these money men, is a faceless but powerful bureaucrat, Kuldeep Goyal of BSNL; a professional CEO betting his career on India’s mobile market, Arun Sarin of Vodafone; and a couple of new and potentially powerful entrants, including the Chandras of Unitech.

Together, these unlikely players are acting out a somewhat predictable script, one that has shaped many industries in India. First, there is the manipulation of public policy required to gain entry into a regulated industry. Then comes the collective jostling between players for superior positions vis-à-vis each other. Following this are the expensive ad campaigns and marketing warfare necessary to get consumers to pay big bucks for shoddy services that cost relatively less in most other countries. And finally, the market speaks and there is a winner. But, of course, we’re not there yet in telecom. The field is still wide open and the war is still too close to call.

Skirmish Redux
Ratan Tata’s quiet voice and gentle manner don’t mark him out as a man in a hurry. But he is. After five years of fumbling his telecom strategy, Tata, who has invested Rs 10,000 crore in the industry, is determined to succeed in it. “Tata Teleservices has a sad history,” Tata told BW. “We have had our own problems in terms of the wrong CEOs. Now we have got an aggressive person in Anil (Sardana)… and we are more entrepreneurial than we were.”

Sardana, the bespectacled, professorial general fighting Tatas’ telecom battle and Tatas’ regulatory advisors in New Delhi are being uncharacteristically aggressive for the group. Sardana is indignant about how his competitors have manipulated regulations in New Delhi, and publicly accuses many of them of hijacking India’s telecom policy. The man who has foxed Tatas, as well as a host of other telecom wannabes, including initially even the Ambanis, is Sunil Mittal. He, along with Vodafone Essar (earlier Hutch Essar, when it was owned by the Ruias), was an early entrant into the industry and took advantage of the government’s ignorance of the sector to secure an unassailable position for himself. Mittal’s game was simple and he’s still playing it. The mobile phone industry is dependent on the spectrum (or airwaves) that carry mobile phone signals at various frequencies.

Mittal, along with Hutch/ Vodafone, made sure he cornered as much of this scarce and limited resource as he could at the cheapest rate. While spectrum cost the earth in most countries, Mittal and the Ruias of Hutch/Vodafone made sure they got their spectrum at just Rs 1,651 crore for 4.4 Mhz, roughly 10 per cent of the price for the equivalent spectrum in the US (see ‘Charge!’, BW, 10 December 2007). When Tata pointed this out and offered to pay more, Mittal mocked him by saying those with excess money should donate it to the Prime Minister’s Relief Fund. Such dominance over regulations has irked Tata the most, mostly because his values prevent him from playing the same game.

Also in Tata’s predicament, but unable to partner with him because of mutual differences over wider issues, is Anil Ambani. In a letter to Prime Minister Manmohan Singh on 6 November 2007, the Reliance Communications chairman alleged that “large existing GSM operators” had deprived “the government of revenues of an estimated few thousand crores of rupees in direct and indirect taxes”. He wrote they had “unjustifiably taken away precious and scarce spectrum in the past: free of cost, far in excess of their actual requirement of 6.2 Mhz they were entitled to under their licences”.

Interestingly, Idea Cellular, which Birla took control of after buying out Tatas’ stake, also benefited from the government’s pro-GSM policy. But it has maintained a low profile in New Delhi even as the Bharti-Vodafone combine went into heated conflict with Tatas and Reliance. Their success in turning the battle on the policy front was obvious after new Telecom Minister A. Raja took a series of steps to undo the Bharti-Vodafone virtual oligopoly.

The new policy successes of Tatas and Reliance can be best seen in the advent of number portability, which comes into effect from 1 April. As late entrants, Tatas and Reliance could only really try to win first-time cellphone users. But with number portability, which allows consumers to switch between mobile service providers without changing their number, they will also be able to attack the existing consumers of companies such as Bharti Airtel and Vodafone Essar. Since these operators have many more users than Tatas or Reliance, their networks are clogged. The new operators will be able to attract disgruntled users. “The biggest casualty has been customer services,” says Sardana. “The only thing that differentiates the operators and sustains them is the service quality. The quality of survey (QoS) of the biggest player (Airtel) is the worst.”