'This Is The Year Of Consolidation' - Diwaker Singh, managing director, Skycell

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From a political journalist to heading a cellular phone company, the transformation

speaks volume. As the managing director of Skycell, one of the cellular operators in

Chennai, Diwaker Singh has been, in the last two years,

formulating innovative service schemes and marketing strategies. This has resulted in the

company gaining 60 percent marketshare in the city. Diwaker gives his perspective of the

Indian cellular industry in an interview to Akila Subramaniam. Excerpts:

 

How do you assess the cellular market in

India?

Well, the cellular market in India has not stabilized as yet. In the

last six months, particularly, there has been a 50 percent drop in additions on new

subscribers. This has been mainly owing to the general state of the economy. Cellular

phones are not in the priority list of people. Target of cellular users by the Income Tax

department has also had its impact.

For the last two years, the cellular operators have wooed customers at

any cost and used business prudence to get new customers. The metro operators have emerged

stronger on the financial and quality side today.

By quality I mean, assessing the revenue potential of the customer who

has the ability to pay his bills on time. For, the biggest cost in this industry is the

interest cost. Fifty percent cost of revenues on margins is on the interest. This means we

need deeper pockets to keep the market alive.

What are the trends in the cellular industry? SIZE="2" COLOR="#000000">

This is the year of consolidation for the cellular industry. From the

companies’ side, the consolidation is happening. There is an increasing focus on

profitability rather than looking at numbers. Earlier, the performance of an operator was

judged by numbers rather than on bottom-line. But today, the operators are also looking at

quality of customers and not necessarily numbers. There is also a focus on market

segmentation–to look for and identify more closely at the right business segments.

There is a trend, almost a drive amongst operators to reduce bad debt and increase profit.

And also a direction towards reducing marketing and acquisition cost. SIZE="2">

From the customers’ point of view, after the initial high, the

actual cell users are buying cells, unlike the past where it was more for the status

symbol. It is becoming a more rational market. Alongside, there is a push from the

customers–they are asking for better quality of service and value-adds. SIZE="1" COLOR="#094891">

What are the top-of-mind subscriber demands in

the cellular industry?

The typical demands are for a good network that will facilitate a clear

call. There is demand for good, clean, and accurate bills. And the subscriber in case of a

problem, wants a quick response. Needless to say, they expect us to keep upgrading our

infrastructure.

What is your reaction to MTNL’s entry

into the cellular market?

I believe that the government should know that the cellular industry is

in a bad shape today. The government should give time for the existing cellular operators

to settle down before opening the door for a third operator. Besides, the market is not

big enough to accommodate a third player.

What has been your experience in the Chennai

market? Has it become a mature market as yet?

Typically in the cellular industry, the market development cycle is

anywhere between five to six years for it to reach maturity. The cellular industry in

India is now in its infancy. The actual maturity will take place, when people realize the

benefits of the cell and use it only for the purpose of it, as opposed to the status

symbol. This, we hope, will happen in the next one or two years.

From our view point, the penetration in the market has been fairly

good. When compared to the population of the city and the cell subscriber ratio, it is

good. It is better than Calcutta. But unlike Delhi, Chennai is a difficult market to break

in. But once that is done, it is a steady market.

We are expecting high buying from corporates this year, and are looking

at cell penetration in tiers 3 and 4, which has not happened. Especially, now with the

slump, the cost on communication and entertainment is immediately cut down.

Our present subscriber base is more than 30,000. We are not unhappy

with this base. We are using this year to consolidate. The break-even has already begun to

happen in the last four months, and we are making profits on the operating level. The

financial year 1998 will see cash profits and the year 1999 will be a year of profit for

us. As of now, the profit is mid-range, neither low nor high. COLOR="#094891">

What are Skycell’s value-adds? SIZE="2" COLOR="#000000">

A 24 hour customer care cell is in itself a value-added service. We

have the Tamil Customer Care cell that helps the subscribers in vernacular and caters to

40 percent of the subscriber base. There is also a Tamil Interpreter Service, which helps

a non-Tamil speaker in case there is a language problem. The other regular services

include travel service, pre-paid service, emergency ambulance service, and pharmaceutical

service.

We have also developed a web site

inhouse–www.skycell-india.com–which has an interactive column to E-mail in to

us.

What are the value-adds in the pipeline? SIZE="2" COLOR="#000000">

We have a lot of them which will be launched soon. The "closed

user group" service will enable a closed user group to speak to each other for a

lower rate as opposed to an external call. Herein, a subscriber can identify certain

numbers for three phones and the three can talk among themselves. We are launching the

"virtual fax" service which will indicate to a subscriber that he has received a

fax message and he can get it printed at a nearby fax centre. An interactive voice system

is being upgraded to cater to customer’s needs and keep them informed on their topics

of interest. We will release the SkyCell Mobile Guide—a directory which lists numbers

of prominent commercial centres and emergency services in the city. About 40,000 free

copies of this directory will be distributed to the subscribers. COLOR="#094891">

What is the current backbone infrastructure of

Skycell?

We have one of the best network backbones in the country which has been

tested by international giants such as Bell South and Nokia. Six months back, huge

investments have been made on getting the entire network on fibre-optic cables. Five new

base stations have been added to the network. This has already started producing results.

For instance, four months back, we had 2,000 callers per months in the subscriber care

centre concerning no signals or poor signals. And today it has come down to less than 150. SIZE="2">

This is due to the optimization of systems, including all the 36 sites

which cover the entire licensed area of Chennai. This has enabled customers call on the

roads without problems. The network and billing systems have also been changed, and are

customized to the Indian market.

When does Skycell propose to introduce the

national roaming facility?

We will launch this facility very soon. With our partnership through

GlobalConnect, we have installed 21 network cards all over India and will shortly offer

automatic roaming facility. This facility would require just a change of the first

five-digit numbers in each city, with the subscriber number remaining the same. And since

the infrastructure is in place, it is just a question of time before we launch the

international roaming facility too.