Description
The document about Sales & distribution network at TATA Tele Services document gives an insight into INdian telecom GSM CDMA, Tata group, postpaid prepaid, competitor analysis (Docomo), distribution network logistics, retail, margins and incentives. It also compares market share of Airtel, Vodafone, BSNL, reliance, aircel, idea etc.
(Sales & distribution network at TATA Tele Services)
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Index
Contents Number Page
1. Indian Telecom Industry 2. Tata Group 3. Tata Teleservices 4. Different Marketing Channels at Tata Teleservices
3 8 9 12 12 18 23
4.1 Postpaid 4.2 Prepaid
5. Competitior Analysis (with respect to launch
of Tata Docomo in Tamilnadu circle) 5.1 Logistics Model 5.2 Margins and Incentive Structure 6. Conclusion 24 26 27
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1. Indian Telecom Industry:
Indian Telecommunication industry, with about 525.65 million mobile phone connections (Oct 2009), is the third largest telecommunication network in the world and the second largest in terms of number of wireless connections. For the past decade or so, telecommunication activities have gained momentum in India. Efforts have been made from both governmental and non-governmental platforms to enhance the infrastructure. The idea is to help modern telecommunication technologies to serve all segments of India’s culturally diverse society, and to transform it into a country of technologically aware people.
Telecom Industry an Overview
Indian Telecom Industry Facts: Mar 2009
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Indian TelecomS tatistics Total Telephone subscriber base Over all Teledensity F ixed-L User base ine W irelessUser base(GS C MA) M+ D GS S M ubscriber base C MA S criber base D ubs Monthly new additions ( W ireline +W ireless) Monthly New additions( W ireles s) Monthly New additons(W ireline) B roadband S cribers uns
429.72 m n 36.98% 37.96 m n 391.76 m n 288.36 m n 103.4 m n 15.87 m n 15.64m n .23 m n 6.22 m n
Telecom Subscriber base
T le o S n s rib r b s inin ia e c m u bc e ae d Ya er S bc e b s u s rib r a e te d n ity le e s 2 0 -0 02 3 5 3 5 .1 2 0 -0 03 4 7 6 7 2 0 -0 04 5 9 .4 8 9 .1 2 0 -0 05 6 10 4 .3 1 .8 2 2 0 -0 06 7 26 0 1 .3 8 2 0 -0 07 8 30 2 1 .9 9 2 0 -0 08 9 49 2 3 .9 6 8
S bc e b s u s rib r a e
50 0 45 0 40 0 35 0 30 0 25 0 20 0 15 0 10 0 5 0 0 2 2-0 2 3-04 2 4-0 20 5-0 20 6-0 2 07-0 2 8-0 00 3 00 00 5 0 6 0 7 0 8 00 9
S ubscriber ba se
Some Facts analysed from the above data are: • • Indian overall teledensity is approx 37% but still it is much lesser than developed countries so enough scope for new GSM player. New Subscribers like to go for Mobile services rather than fixed land line as monthly new additions subscriber base for wireless contributes almost 98% of the total. • Indian Telecom subscriber base has increased at faster rate over last 2 years.
Tele-density: India
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Some of the analyzed facts are: • • • Indian showed tremendous growth in telecom market. It is expected to grow with even more pace in next few years. Urban market grown at much faster pace and still there is enough scope in rural market to tape.
Revenues: Telecom Industry: Revenue Graph (estimated by DOT in June 2007)
50 40 Revenues (USD billion) 30 20 10 0 2 0 0 2 - 02 0 0 3 - 02 0 0 4 - 0250 0 5 - 02 0 0 6 - 0 7 … .. 3 4 6 … . 2009-10 9 10 11 15 20 43
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•
•
Revenues generated by Telecom industry has grown much faster in last few years. Revenues were expected to cross $43b by 2009-2010 but Indian telecom industry already crossed the $50b mark.
Operators in INDIAN Telecom Industry: Major Players in different segments of Indian telecom industry are:
B a s ic S e r v i c e s O p e r a t o r s
BSNL
M O B IL E S E R V IC E S M S e r v ic e s O p e r a t o r s GS
A irte l
MTNL R e lia n c e TTSL R e lia n c e BSNL V o d a fo n e Id e a
In t e r n e t S e r v ic e s O p e r a t o r s
BSNL MTNL R e lia n c e
C D M A S e r v ic e s O p e r a t o r s
R e lia n c e
TTSL TTSL BSNL A irte l
M T N–LM a h a n a g a r T e le c o m N ig a m T L tdT. a t a T e le s e r v ic e s L td . T S –L B S N –LB h a r a t S a n c h a r N ig a m L td .
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Some other relatively new GSM/CDMA players are:
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Aircel Loop MTS VIRGIN
Market Share of different Mobile Operators: These Figures are Q1 -2009 figures:- Subscriber base figures are in millions.
INDIAN MOB E MAR ET IL K Operator Custom Base er MS Airtel 93.92 23.99 Vodafone 68.77 17.57 BS NL 46.68 11.93 IDEA 43.02 10.99 AIR EL C 18.48 4.72 R IANC EL E 74.02 18.91 TTS L 35.73 9.13 Others 10.8 2.76 Total 391.42
INDIAN MOBIL MAR ET MS E K
INDIAN MOBILE MARKET MS 23.99 17.57 11.93 10.99 4.72 18.91 9.13 2.76
Some Facts analysed from the above chart are: •
•
Airtel is leading Indian mobile market, followed by Vodafone and BSNL. Indian total subscriber base is around 400mn in Mar2009.
GSM V/S CDMA Market: Market Share* of Wireless Operators (Q1 -2009)
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Mobile Market GS M C DMA TOTAL
S ubscriber base 288.36 103.04 391.4
MS 73.67 26.33
Mark S et hare GS v/sCDMA M
CDMA 26% GSM 74%
Some Facts analyzed from the above chart: • • GSM is contributing approx 75% of total Mobile market. GSM has been dominating Indian telecom market due to its low affordability cost and mass reach. • GSM also been popular due to its low switching cost. CDMA certainly not proved to be the butter for Indian consumers.
2. TATA Group TATA group was founded by Jamsetji Tata in 1868. Tata’s early years were inspired by the spirit of nationalism. It pioneered several industries of national importance in India: steel, power, hospitality and airlines. The Tata name has been respected in India for 140 years for its adherence to strong values and business ethics. In more recent times, its pioneering spirit has been showcased by companies such as TCS, India’s first software company, and Tata Motors, which made India’s first indigenously developed car, the Indica, in 1998 and recently unveiled the world’s lowest-cost car, the Tata Nano. Tata companies operate in seven business sectors: communications and information technology, engineering, materials, services, energy, consumer products and chemicals. They are, by and large, based in India and have significant international operations. The total revenue of Tata companies, taken together, was $62.5 billion (around Rs251,543
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crore) in 2007-08, with 61 per cent of this coming from business outside India, and they employ around 350,000 people worldwide. There are 27 publicly listed Tata enterprises and they have a combined market capitalisation of some $60 billion, and a shareholder base of 3.2 million. The major Tata companies are Tata Steel, Tata Motors, Tata Consultancy Services (TCS), Tata Power, Tata Chemicals, Tata Tea, Indian Hotels and Tata Communications. Tata Steel became the sixth largest steel maker in the world after it acquired Corus. Tata Motors is among the top five commercial vehicle manufacturers in the world and has recently acquired Jaguar and Land Rover. TCS is a leading global software company, with delivery centres in the US, UK, Hungary, Brazil, Uruguay and China, besides India. Tata Tea is the second largest branded tea company in the world, through its UKbased subsidiary Tetley. Tata Chemicals is the world’s second largest manufacturer of soda ash and Tata Communications is one of the world’s largest wholesale voice carriers.
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TATA
TELE
SERVICES
Tata Teleservices is part of the INR Rs. 2, 51,543 Crore Tata Group that has over 80 companies, over 3, 30,000 employees and more than 3.2 million shareholders. With a committed investment of INR 36,000 Crore (US$ 7.5 billion) in Telecom (FY 2006), the Group has a formidable presence across the telecom value chain. Tata Teleservices spearheads the Group’s presence in the telecom sector. Incorporated in 1996, Tata Teleservices was the first to launch CDMA mobile services in India with the Andhra Pradesh circle.
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Beginning with its acquisition of Hughes Telecom (India) Limited in December 2002 [now renamed Tata Teleservices (Maharashtra) Limited], which provides services in the Mumbai and Rest of Maharashtra telecom circles, the company has swung into expansion mode and currently has a pan-India state-of-the-art network. Having pioneered the CDMA 2000 technology platform in India, Tata Teleservices has established a 3G-ready robust and reliable telecom infrastructure in partnership with Motorola, Ericsson and Lucent. The company has also received the license from the Department of Telecommunications to launch GSM services as well. With this launch set for early 2009, TTSL is on the threshold of emerging as a true-play dual technology telecom operator. In November 2008, Tata Teleservices entered into an agreement with Japanese telecom major NTT DOCOMO, as part of which the Japanese company acquired a 26% stake in TTSL for USD 2.7 billion. The transaction marks a key step in the strategic evolution of Tata Teleservices, as it moves towards a pan-India dual network presence. On a broader level, the transaction is also expected to mark the beginning of a relationship of broader co-operation between Tata companies and the Nippon Telegraph and Telephone Corporation (NTT). The potential benefits and synergies from the alliance with DOCOMO cut across marketing, handset development and technical support, all of which are expected to create new opportunities for both companies. The alliance will also accelerate Tata Teleservices’ GSM plans and help the company penetrate the market with advanced technology and new VAS offerings. Tata Teleservices’ bouquet of telephony services includes mobile services, wireless desktop phones, and public booth telephony and wire-line services. Other services include value-added services such as voice portal, roaming, post-paid Internet services, 3-way conferencing, group calling, Wi-Fi Internet, USB Modem, data cards, calling card services and enterprise services.
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Some of the other products launched by the company include prepaid wireless desktop phones, public phone booths, new mobile handsets and new voice and data services such as BREW games, voice portal, picture messaging, facebook, M commerce applications, polyphonic ring tones, interactive applications like news, cricket, astrology, etc. TTSL has been recognized globally for its best products and excellent customer services. Some of them are: Awards and Recognitions:
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TTSL has won the Global HR Excellence Award 2009 under the “Institution Building Category” by World HRD Congress 100 True Value Shoppes (TVS) on the same day across the nation . Project Drishti Bags 2nd National Telecom Award . Innovative Retail Concept of the Year - Tata Teleservices Ltd.
• • •
Products: TTSL offers the full range of communications services, including:
• • •
Telephony Services: Fixed and Mobile , under brand TATA Indicom Media and Entertainment Services: Satellite TV Data Services: Leased Lines, Managed Data Networks, IP/MPLS VPN, Dial-up Internet, Wi-Fi and Broadband under brand photon plus & pro. Value-Added Services: Mobile and Broadband Content/Applications, Calling Cards, Net Telephony and Managed Services
•
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Infrastructure Services: Submarine Cable Bandwidth, Terrestrial Fiber Network and Satellite Earth Stations and VSAT Connectivity
LOCATIONS: - USO Circles: TTSL have a strong USO base in 215 SDCAs across 9 circles viz. Rajasthan, MP, Bihar, UP E & W, Punjab, Haryana, Karnataka and Maharashtra.
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Different Marketing Channels at Tata Teleservices:
For Tata Teleservices, The telecom operations are carried out in two formats: • • Postpaid Prepaid
Both the formats have different sets of customers and also different sales and distribution system. 4.1 Postpaid
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Unlike prepaid which is available through a huge network of retailers, post-paid cannot be sold through the general retailers because of Bill Collection and stricter Verification process. Postpaid customers form a low percentage of customer bases but are high revenue generating and hence are treated as ‘Exclusive Customers’. With switching cost in Prepaid being almost negligible nowadays, these customers offer a much higher level of loyalty and hence are given special treatment by the telecom companies. The Average Revenue per User (ARPU) is much higher for postpaid customers than prepaid customers. Postpaid sales and distribution is generally done through the following channels
? DSA (Direct Sales Associates) ? DST (Direct Sales Team)
? Modern Trade
? Exclusive Stores (Company owned outlets)
Channel Partners in Postpaid Sales and Distribution
Direct Sales Associate: As the name implies the DSA sells new connections to the potential customers directly. The DSA approaches the customers through sales agents. The database of potential customers is generated through the following means: • • Existing database from past or current businesses Cold Calling
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•
References
Direct Sales Team: The modus operandi of a DST is similar to a DSA. The difference lies in the management aspect of the sales force. In case of DST the sales force is managed entirely by a representative from the telecom company. The DST’s chief responsibility is to finance the whole process. Modern Trade: It includes stores like The Mobile Store, Planet M, Big Bazaar, Vishal Megamart and other multi brand outlets which sell a variety of products. The stores may be locally present or may have national presence. These stores generally have tie ups with the telecom companies directly. Exclusive Stores/ Hubs: These are company owned outlets and offer extra services like customer care and bill collections. Due to geo-limits Postpaid connections are not available in all the places like Prepaid connections. There are constraints in bill collection and bill delivery which is a prime reason for non-availability of Postpaid connections in all areas. 4.1.1 Direct Sales Associate (DSA) A Direct Sales Associate is an individual or an organization which sells a product or a service directly to the customer. A DSA maintains a sales force which interacts directly with the customer and markets the product or the service. In the telecom sector, a DSA plays a major role in selling Postpaid connections. Major percentage of sales comes through the DSAs. A good DSA has the following features: • • • • • Good reputation in the market Huge potential customer database which is complimentary with the requirements Experience in the distribution area An efficient sales force Investment ability
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Self involvement in the business
The DSA has the following responsibilities:
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Approach Potential Customers: In order to sell new connections, the DSA has to approach customers through its sales force and explain the various plans and also the benefit.
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Manage the Sales Force: The DSA has to manage the sales force and make sure that the team achieves the target. The work of the sales force must be monitored periodically.
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Bill Collection: The telecom company’s responsibility is to send the bill to the customer. Once the bill is sent the DSA has to send a person to collect the bill amount from the customer. The telecom company appoints a representative who acts as an interface between the DSA and the company.
4.1.2 Modern Trade Marketers of every hue and colour — banks, credit card companies, cars, airlines are trying to grab the opportunity to interact closely with their target audience. Be it cobranding activities with retailers, the selling of wall space within outlets, signages, endof-aisle spaces, carry bags, trolleys or even in-store TV - Modern Trade is acting as the medium for brands to connect directly with consumers. For retailers it is a revenue stream that is fast becoming a steady pipeline. For them, this means the formation of a regular revenue pipeline; for brands it serves as a conduit to directly interact with the customers. There is a growing realization that brands have to be built in a retail environment, and therefore brands undertake activation initiatives to engage customers. Experts believe that retail will eventually become an important medium, helping expand the advertising pie. The idea behind Modern Trade store is to generate profits by maximising the retail space as well; it’s about space selling or space value enhancement. Within an outlet, there are many opportunities like signages, end-of-the-aisle promotions, wall space and even
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trolley stickers which brands can take up. In any category, consumers have no restriction on the choice of brands. So if at that time a brand can connect with the consumer, it’s more likely to hit bull’s-eye. That’s what modern trade allows brands to do. Retail spaces are being increasingly utilised to undertake short-term activities like launches and co-promotions. In all tie-ups, care is taken to ensure that there is synergy between the two brands.
Distribution in Modern Trade: Modern trade is the latest concept that has emerged as an attractive platform to increase their sales. As discussed above there are certain modern trade stores which have national presence and some have local presence therefore; the distribution channel for Modern Trade should be different.
a. HO to HO connection: In certain Modern trade stores a head office to head office
tie-up is required. A ‘Vendor Format’ is exchanged for this purpose and an agreement is reached upon. A central agreement is advantageous since once this process is completed a new agreement is not needed whenever the telecom operator launches its service in a new region.
b. Indenting for new stock: In order to indent for new connections the Store Manager
of a particular store sends the request to Operation in-Charge of that particular area or region. The in-charge combines all the requests and makes a master sheet which is sent to the head office. The final decision regarding the total number of new connections that should be sent lies in the hands of the head office and is determined by the past sales record.
c. Rising of Purchase Order (PO): Once the master sheet is received at the head
office of a particular modern store they raise a PO to the regional office. Once they get a Purchase order (PO) it was further send to Operation head and the respective company.
d. Collection of SIM cards: Once the operation head gets the PO it’s his duty to
collect and allotted number of SIM cards to particular outlet.
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Mode of Payment The mode of payment is simple and straight – Advance Payment. For all orders (purchase of new sim cards, recharge vouchers) the payment has to be made in advance. Once the payment is received, the order is dispatched. Collection of CAF forms: Different companies have different system for CAF collection. Few companies have a dedicated person who collects all the forms while some require that the store sends all the CAFs to the company through courier and the courier charges are reimbursed as per the agreement. Commission System: As far as the Margin is concerned it also has different methods: • • It can be Fixed irrespective of the number of new connections sold It can be a combination of both (Fixed + variable) i.e. its fixed for
particular number of connections and after that its variable for every extra connection sold • It can also be slab wise
Table 3.1: Sample Commission Slabs
Range 0-100 100-200 >200
Commission per new Connection (Rs) 500 600 700
Operational Analysis of Modern Trade Stores The operations of modern trade stores vary from store to store. There are few stores like Vishal Megamart, Koutons where the tie-up is at the local level while stores like The Mobile Store, Big Bazaar require a national level tie up.
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The Mobile Store: The Mobile Store is a one stop shop for all needs related to Mobile Phones. The store sells handsets of various brands and also sells accessories as well as new connections. The Mobile Store has a national presence and has stores in major cities of India. For a telecom operator to sell its connections through the mobile, store a tie up at the national level is required. A vendor format is exchanged between the Head Offices of the two organizations. The new connection procurement is at the regional level. The Mobile Store sells FOCC (Free of Cost Connections). The customers get new connections free of cost and have to do a first recharge at the store. A representative from the telecom company generally collects the CAF (Customer Application Form) from the store or the CAFs are sent to the company through courier. Big Bazaar, Pantaloons: The mobile section of these stores is managed by the Future Group under the brand name ‘Mobile Bazaar’. The store sells mobile handsets, new connections as well as accessories. All the three stores have national presence and Big Bazaar is the most widespread. A national tie-up is required between the telecom operator and the Future Group in order to sell new connections through the three stores. The Mobile Bazaar is managed by the employees of the Future Group. Planet M: Planet M has recently entered the telecom sector and apart from selling audio and video CDs and DVDs, it now sells mobile handsets bundled with a new connection (currently the tie up is with Airtel) as well. Planet M also has national presence and is the market leader in audio and video retailing. The tie-up is again at the national level between the telecom operator and Planet M. Spencers: Spencers is owned by the RPG Group and is a superstore which sells a variety of items ranging from grocery to electronics to garments. Spencers provide floor space for various branding activities.
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4.1.3 Exclusive Stores/ Hubs
This is a new format which has recently evolved and is more customers oriented. The exclusive stores may be Company owned or privately owned. The Company owned outlets sell new connections as well as provide customer service. The Privately owned outlets generally sell only new connections but may provide customer service as well. The Post-paid Bill Collection process is carried out by these exclusive stores/hubs. The stores are designed as per the norms set by the telecom company. They provide extensive information to the customers about the existing tariffs and offers, VAS and also take care of customer complaints.
4.2 Prepaid Prepaid customers form the major chunk of the customer base. Almost 90% of the customer base is formed by the prepaid customers. A prepaid customer can be anyone from any income group. Prepaid Sales is carried out through the following channels: • • • Retailers Modern Trade Exclusive Stores /Hubs
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Channel Partners in Prepaid Sales
Shown below is the flow of the Prepaid Sales and Distribution System
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Prepaid Sales and Distribution System
Prepaid distribution system differs from Post-paid distribution system. Unlike the latter Prepaid distribution has more involvement from both from inside and outside company such as Retailer, DSE, Distributor, Sales Force etc. Due to involvement of so many people designing a prepaid distribution takes lot of time and demand huge experience. Also the process involves many new activities which are not there in post-paid. Below we have discussed the activities in brief: 4.2.1 Retail Mapping There are a number of retail outlets (all those who sell new connections and/or recharge vouchers) present in a city but in order to know the exact number of retail outlets the exercise of ‘Retail Mapping’ is done. This activity helps in the following information about the outlets: • • • Outlet name Owner name Contact number
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•
Total number of new connections sold per month (including individual information for all operators)
•
Total amount of recharge (easy, paper) done by the retailer per month (including individual information for all operators)
• • • •
Present inventory of all operators Place for outdoor and indoor branding Type of existing boards i.e. non lit or GSB (glow sign boards) Type of board that can be placed
To collect the above information a Retail Mapping Format is specially designed for this purpose. As it is an important activity hence it needs to be carried out very carefully and on an average one person can only collect data of 35-40 retailers in a day.
Allotment of Retailers to Different Categories Once the retail mapping activity is over, all the retailers are divided into different categories based on the number of activations they do. Following is the categorization:
•
A+ >= 200 connections A > 100 <199 connections B > 50 < 99 connections C > 15 < 50 connections D < 15 connections
• • • •
Once retailers are allotted in different categories the total number of outlets in a particular category can be obtained. This categorization helps in Beat Planning. 4.2.3 Beat Planning
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This is the most challenging and crucial activity as it involves lot of experience and brainstorming. Before understanding what is beat and how beat planning is done relationship between them must be known: o 1 Grid = Minimum 2 Sub grid o 1 Sub Grid = 1 Beat o 1 Beat = 2 Sub Beat Sub Beat: One sub beat means the total number of retail outlets a beat boy can visit in one day. Total numbers of retail outlets that fall under one sub beat depend upon few things: o Area to be covered o Number of outlets in that area Total number of outlets may vary due to above mentioned points but for average we take it 30 retail outlets. Beat: It is the total number of retailers a beat boy or DSE (direct/distributor sales executive) can visit. As already stated that one beat consist of two sub beats but the average number of retailers that fall under one beat are 55 which is less than 60 (total of two sub beats). This is because within sub beat there are certain outlets which fall under A+, A and B category and according to the company’s norm: o A+, A and B category retailer are to be visited daily o C and D category retailers every alternate day Therefore, there is a difference between the actual total number of retailers that fall in beat and the total theoretical number of retailers. 4.2.4 Distributor Selection In broader sense the process of selecting a distributor in prepaid and postpaid is nearly same. The major difference lies in the type of distributor one prefers. For prepaid
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distribution system FMCG distributors are more preferred. But there can be exceptions if the distributor is well reputed and has a huge distribution network. Given below are few points which are considered before looking for a distributor: • • • • • An experience of more than 2 years in distribution Preferably not engaged with any other telecom operator A good infrastructure in place Good sales force Willingness to make investments
4.2.5 Distribution System As already discussed that Prepaid Distribution involves many people from both within and outside the company therefore it is very important to have a secure and well planned distribution network. To avoid confusion and facilitate tracking each and every Retailer, DSE and Distributor is provided with ‘Unique Number and ID’. This unique number/ID also helps in finding out the various transactions which has taken place. Distributors can track only those retailers and DSEs which fall under their area or directly working under them respectively. Similarly DSEs can track only those retailers who fall under their area. Once this activity is completed the distribution becomes very simple. The various steps involved in distribution are: • Distributor sends an advance payment to company through RTGS/DD/Cheque along with the requirements. • Once the payment is received the company dispatches the order to the distributor through appropriate means. • Distributor maintains the inventory and distributes it through the DSE.
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•
DSE visit retailers according to the beat plan and deliver the required order and collect payment.
•
They pass on all the information to retailers regarding the recent schemes and also take new order.
In telecom industry products and schemes change rapidly, hence it is important that all concerned people are updated about the same at the appropriate time. For this messages and calls are made to the retailers as and when required.
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5. Competitor Analysis: In this section, the major competitors like Airtel, Vodafone and Aircel are analysed. Their channel model and strategies are understood. Some Important facts about competitors are: • • • TATA GSM is the late entrant in Market so stiff competition is there. Major Competitors are Airtel, Vodafone, Aircel, Reliance, MTS, and Virgin etc. Tata should do Benchmarking with the dominant players like Airtel, Vodafone, whereas TATA should also examine the strategies adopted by new comers like MTS and Reliance GSM. • Airtel is dominating market with almost 50% MS.
We have analyzed competition under following areas: • • Logistics Model Margins and Incentive Structure
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5.1 Logistics Model: Competition Logistics model deals with supply pattern to MT chains, CAF collection process and man-power support given by Competition to the modern trade outlets. Basically Competition serves telecom market in two Supply formats: 1. Direct supply through company 2. Distributor Supply
Both direct supply and distributor supply has their own pros & cons so TATA have to trade-off between our MT accounts and supply patterns. We have identified the supply pattern (Direct/Distributor) of the competition to the different chains as per their business potential. We have also identified the CAF collection process of competition and man-power support given by competition. Results are shown in the table below:
AIRTEL
DIRECT SUPPLY (SIM,EC,HANDSETS) Univercell, Mobile Store, RPG Cell u com, HotSpot
AIRCEL
Only Univercell has now tied with Aircel for Direct
VODAFONE
Mobile Store and One Mobile
Hash 10, Poorvika, Techno Park, Separate distributors for separate DISTRIBUTOR SUPPLY Cell o Cell, Vivek, chains WaveTel,Sangeetha NO OF DISTRIBUTORS MANPOWER-CSM MANPOWER-DSEs 1(Hello Telecom) 4 (3-chennai, 1-ROTN) 10 ( 8-chennai, 2 -Rotn) 4 ( Each distributor supplies to 2-3 Chains) 2 (1-chennai, 1-ROTN) DSEs of respective distributors
Single Distributor: Rocky Agencies supplies to all Chains except Mobile Stores and One mobile 1 ( Rocky Agencies) 2 (1-chennai, 1-ROTN) 8 in chennai & rotn distributor DSEs are involved The DSE's take care of CAF collection
CAF COLLECTION
LCS FINANCIAL SERVICES COLLECTS CAF FOR AIRCEL,AIRTEL,TATA CDMA.THIS AGENCY COLLECTS CAF FROM ALL CHAIN STORES
Analysed facts from the table
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•
Competition has chosen different approach for different chains as per the account type ( National/Regional), Cost benefits, control benefits, Business Potential etc. ex. Vodafone supplies through distributor – Rocky agencies, while Airtel supplies directly for National accounts, TMS & Univercell but for small accounts they also go with distributor supply.
•
Airtel & Aircel collect their CAF through a third party named LCS which protect them from the hectic work of CAF collection and enables them to keep more focused on their core business.
•
Vodafone collect CAF through DSEs, as it will help to stabilize the constant relationship with customer and also helps to reduce CAF rejection rate. TATA Logistics Model
Merits of Logistics Model: • • • MT chains have been categorized as per business size and will be served accordingly. National Partners & Univercell will be protected with Direct Supply. Local chains will be covered with a dedicated MT distributor.
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• •
Universal & TMS contributes 65% business so will be given special focus in service, promotions & incentives. CAF collection will be outsourced to ensure more focus on our core business & ensure hassle free CAF collection
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5.2 Margins and Incentive Structure: Competition
MT Telecom Industry works hand-in-hand with distributors and retailers. Distributor and Retailer both play an important role as channel partners to bring numbers to the operators. So, Most of the operators seems to give special focus to the incentives and margins of channel partners to keep them happy and generate higher throughput. We have analysed the competition offering to the retailers & distributors and proposed our margin & incentive model that should be followed by TATA in order to differentiate itself and serve the market in much better way. Our analysis shown in the below tables:
Margin Structure
Model Distributor supply Direct supply Channel Margin Distributor margin(%) Retailer margin(%) Retailer margin(%) AIRCEL 2.25% 3.80% AIRTEL 1.50% 3.80% 4%-5.5% VODA 1.75% 3.50% 5.00% TATA 2.00% 3.50% 5.50%
Incentive Structure
Incentive Structure AIRTEL 75-150
MT Chains Standard
AIRCEL 50-100
VODA 50-100
TATA 125
•
Competition is offering different margins to different retailers & distributors as per their strength. Above mentioned figures are industry standard figures. Actual figures are not shown to maintain confidentiality.
•
Competition is seems to offer mostly slab-wise incentive structure to different retailers & distributors as per their strength. Above mentioned figures are industry standard figures. confidentiality.
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Actual figures are not shown to maintain
Merits of the Structure
•
Proposed Margins & Incentives are decided such that, TATA will be able to differentiate itself with respect to competition offerings and able to generate large business volumes.
•
Simple but slab based incentive model (slabs are not finalized yet) is suggested to control unnecessary confusion & to avoid channel conflicts.
6. Conclusion
Thus we saw how the business model works for Tata Teleservices. We analyzed other competitors and compared the functionalities of TTSL with them. Various distribution channels and its effect on both postpaid and prepaid services revealed how important the distribution channels are in terms of market reach and revenue generation. Studying logistics model helped to understand the logistic dynamics of the whole business. Also there is a growing realization that brands have to be built in a retail environment, and therefore brands undertake activation initiatives to engage customers. This we saw by studying a concept called ‘modern trade’. Thus looking at the overall picture it seems that TTSL has still a long way to go to achieve breakeven and come at par with Bharti and Vodafone but through capturing the Indian mass through utility, affordability and sentimental values it can reap long lasting benefits.
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References:
1. http://www.tata.com/ : Official website for TATA GROUP 2. http://www.tatateleservices.com/ : Official website for TATATELESERVICES 3. http://www.tataindicom.com/: TATA INDICOM Official Website 4. http://www.dot.gov.in/: Official Website of Department of Telecom 5. http://www.trai.gov.in/:
Official
Website
of
TRAI(Telecom
Regulatory
Authority of INDIA)
6. http://www.airtel.in/: Airtel Official Site 7. http://www.vodafone.in/: Vodafone Official site 8. http://www.aircel.com/: Aircel Official site
9. Official sites of other operators
10. http://www.univercell.in/: Univercell Official Site 11. http://www.themobilestore.in/: The Mobile Store Official site
12. Official Sites of other MT CHAINS
13. http://www.indiastat.com/ : Statistical reports about telecom industry
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doc_745227411.doc
The document about Sales & distribution network at TATA Tele Services document gives an insight into INdian telecom GSM CDMA, Tata group, postpaid prepaid, competitor analysis (Docomo), distribution network logistics, retail, margins and incentives. It also compares market share of Airtel, Vodafone, BSNL, reliance, aircel, idea etc.
(Sales & distribution network at TATA Tele Services)
1
Index
Contents Number Page
1. Indian Telecom Industry 2. Tata Group 3. Tata Teleservices 4. Different Marketing Channels at Tata Teleservices
3 8 9 12 12 18 23
4.1 Postpaid 4.2 Prepaid
5. Competitior Analysis (with respect to launch
of Tata Docomo in Tamilnadu circle) 5.1 Logistics Model 5.2 Margins and Incentive Structure 6. Conclusion 24 26 27
2
1. Indian Telecom Industry:
Indian Telecommunication industry, with about 525.65 million mobile phone connections (Oct 2009), is the third largest telecommunication network in the world and the second largest in terms of number of wireless connections. For the past decade or so, telecommunication activities have gained momentum in India. Efforts have been made from both governmental and non-governmental platforms to enhance the infrastructure. The idea is to help modern telecommunication technologies to serve all segments of India’s culturally diverse society, and to transform it into a country of technologically aware people.
Telecom Industry an Overview
Indian Telecom Industry Facts: Mar 2009
3
Indian TelecomS tatistics Total Telephone subscriber base Over all Teledensity F ixed-L User base ine W irelessUser base(GS C MA) M+ D GS S M ubscriber base C MA S criber base D ubs Monthly new additions ( W ireline +W ireless) Monthly New additions( W ireles s) Monthly New additons(W ireline) B roadband S cribers uns
429.72 m n 36.98% 37.96 m n 391.76 m n 288.36 m n 103.4 m n 15.87 m n 15.64m n .23 m n 6.22 m n
Telecom Subscriber base
T le o S n s rib r b s inin ia e c m u bc e ae d Ya er S bc e b s u s rib r a e te d n ity le e s 2 0 -0 02 3 5 3 5 .1 2 0 -0 03 4 7 6 7 2 0 -0 04 5 9 .4 8 9 .1 2 0 -0 05 6 10 4 .3 1 .8 2 2 0 -0 06 7 26 0 1 .3 8 2 0 -0 07 8 30 2 1 .9 9 2 0 -0 08 9 49 2 3 .9 6 8
S bc e b s u s rib r a e
50 0 45 0 40 0 35 0 30 0 25 0 20 0 15 0 10 0 5 0 0 2 2-0 2 3-04 2 4-0 20 5-0 20 6-0 2 07-0 2 8-0 00 3 00 00 5 0 6 0 7 0 8 00 9
S ubscriber ba se
Some Facts analysed from the above data are: • • Indian overall teledensity is approx 37% but still it is much lesser than developed countries so enough scope for new GSM player. New Subscribers like to go for Mobile services rather than fixed land line as monthly new additions subscriber base for wireless contributes almost 98% of the total. • Indian Telecom subscriber base has increased at faster rate over last 2 years.
Tele-density: India
4
Some of the analyzed facts are: • • • Indian showed tremendous growth in telecom market. It is expected to grow with even more pace in next few years. Urban market grown at much faster pace and still there is enough scope in rural market to tape.
Revenues: Telecom Industry: Revenue Graph (estimated by DOT in June 2007)
50 40 Revenues (USD billion) 30 20 10 0 2 0 0 2 - 02 0 0 3 - 02 0 0 4 - 0250 0 5 - 02 0 0 6 - 0 7 … .. 3 4 6 … . 2009-10 9 10 11 15 20 43
5
•
•
Revenues generated by Telecom industry has grown much faster in last few years. Revenues were expected to cross $43b by 2009-2010 but Indian telecom industry already crossed the $50b mark.
Operators in INDIAN Telecom Industry: Major Players in different segments of Indian telecom industry are:
B a s ic S e r v i c e s O p e r a t o r s
BSNL
M O B IL E S E R V IC E S M S e r v ic e s O p e r a t o r s GS
A irte l
MTNL R e lia n c e TTSL R e lia n c e BSNL V o d a fo n e Id e a
In t e r n e t S e r v ic e s O p e r a t o r s
BSNL MTNL R e lia n c e
C D M A S e r v ic e s O p e r a t o r s
R e lia n c e
TTSL TTSL BSNL A irte l
M T N–LM a h a n a g a r T e le c o m N ig a m T L tdT. a t a T e le s e r v ic e s L td . T S –L B S N –LB h a r a t S a n c h a r N ig a m L td .
2
Some other relatively new GSM/CDMA players are:
6
Aircel Loop MTS VIRGIN
Market Share of different Mobile Operators: These Figures are Q1 -2009 figures:- Subscriber base figures are in millions.
INDIAN MOB E MAR ET IL K Operator Custom Base er MS Airtel 93.92 23.99 Vodafone 68.77 17.57 BS NL 46.68 11.93 IDEA 43.02 10.99 AIR EL C 18.48 4.72 R IANC EL E 74.02 18.91 TTS L 35.73 9.13 Others 10.8 2.76 Total 391.42
INDIAN MOBIL MAR ET MS E K
INDIAN MOBILE MARKET MS 23.99 17.57 11.93 10.99 4.72 18.91 9.13 2.76
Some Facts analysed from the above chart are: •
•
Airtel is leading Indian mobile market, followed by Vodafone and BSNL. Indian total subscriber base is around 400mn in Mar2009.
GSM V/S CDMA Market: Market Share* of Wireless Operators (Q1 -2009)
7
Mobile Market GS M C DMA TOTAL
S ubscriber base 288.36 103.04 391.4
MS 73.67 26.33
Mark S et hare GS v/sCDMA M
CDMA 26% GSM 74%
Some Facts analyzed from the above chart: • • GSM is contributing approx 75% of total Mobile market. GSM has been dominating Indian telecom market due to its low affordability cost and mass reach. • GSM also been popular due to its low switching cost. CDMA certainly not proved to be the butter for Indian consumers.
2. TATA Group TATA group was founded by Jamsetji Tata in 1868. Tata’s early years were inspired by the spirit of nationalism. It pioneered several industries of national importance in India: steel, power, hospitality and airlines. The Tata name has been respected in India for 140 years for its adherence to strong values and business ethics. In more recent times, its pioneering spirit has been showcased by companies such as TCS, India’s first software company, and Tata Motors, which made India’s first indigenously developed car, the Indica, in 1998 and recently unveiled the world’s lowest-cost car, the Tata Nano. Tata companies operate in seven business sectors: communications and information technology, engineering, materials, services, energy, consumer products and chemicals. They are, by and large, based in India and have significant international operations. The total revenue of Tata companies, taken together, was $62.5 billion (around Rs251,543
8
crore) in 2007-08, with 61 per cent of this coming from business outside India, and they employ around 350,000 people worldwide. There are 27 publicly listed Tata enterprises and they have a combined market capitalisation of some $60 billion, and a shareholder base of 3.2 million. The major Tata companies are Tata Steel, Tata Motors, Tata Consultancy Services (TCS), Tata Power, Tata Chemicals, Tata Tea, Indian Hotels and Tata Communications. Tata Steel became the sixth largest steel maker in the world after it acquired Corus. Tata Motors is among the top five commercial vehicle manufacturers in the world and has recently acquired Jaguar and Land Rover. TCS is a leading global software company, with delivery centres in the US, UK, Hungary, Brazil, Uruguay and China, besides India. Tata Tea is the second largest branded tea company in the world, through its UKbased subsidiary Tetley. Tata Chemicals is the world’s second largest manufacturer of soda ash and Tata Communications is one of the world’s largest wholesale voice carriers.
3.
TATA
TELE
SERVICES
Tata Teleservices is part of the INR Rs. 2, 51,543 Crore Tata Group that has over 80 companies, over 3, 30,000 employees and more than 3.2 million shareholders. With a committed investment of INR 36,000 Crore (US$ 7.5 billion) in Telecom (FY 2006), the Group has a formidable presence across the telecom value chain. Tata Teleservices spearheads the Group’s presence in the telecom sector. Incorporated in 1996, Tata Teleservices was the first to launch CDMA mobile services in India with the Andhra Pradesh circle.
9
Beginning with its acquisition of Hughes Telecom (India) Limited in December 2002 [now renamed Tata Teleservices (Maharashtra) Limited], which provides services in the Mumbai and Rest of Maharashtra telecom circles, the company has swung into expansion mode and currently has a pan-India state-of-the-art network. Having pioneered the CDMA 2000 technology platform in India, Tata Teleservices has established a 3G-ready robust and reliable telecom infrastructure in partnership with Motorola, Ericsson and Lucent. The company has also received the license from the Department of Telecommunications to launch GSM services as well. With this launch set for early 2009, TTSL is on the threshold of emerging as a true-play dual technology telecom operator. In November 2008, Tata Teleservices entered into an agreement with Japanese telecom major NTT DOCOMO, as part of which the Japanese company acquired a 26% stake in TTSL for USD 2.7 billion. The transaction marks a key step in the strategic evolution of Tata Teleservices, as it moves towards a pan-India dual network presence. On a broader level, the transaction is also expected to mark the beginning of a relationship of broader co-operation between Tata companies and the Nippon Telegraph and Telephone Corporation (NTT). The potential benefits and synergies from the alliance with DOCOMO cut across marketing, handset development and technical support, all of which are expected to create new opportunities for both companies. The alliance will also accelerate Tata Teleservices’ GSM plans and help the company penetrate the market with advanced technology and new VAS offerings. Tata Teleservices’ bouquet of telephony services includes mobile services, wireless desktop phones, and public booth telephony and wire-line services. Other services include value-added services such as voice portal, roaming, post-paid Internet services, 3-way conferencing, group calling, Wi-Fi Internet, USB Modem, data cards, calling card services and enterprise services.
10
Some of the other products launched by the company include prepaid wireless desktop phones, public phone booths, new mobile handsets and new voice and data services such as BREW games, voice portal, picture messaging, facebook, M commerce applications, polyphonic ring tones, interactive applications like news, cricket, astrology, etc. TTSL has been recognized globally for its best products and excellent customer services. Some of them are: Awards and Recognitions:
•
TTSL has won the Global HR Excellence Award 2009 under the “Institution Building Category” by World HRD Congress 100 True Value Shoppes (TVS) on the same day across the nation . Project Drishti Bags 2nd National Telecom Award . Innovative Retail Concept of the Year - Tata Teleservices Ltd.
• • •
Products: TTSL offers the full range of communications services, including:
• • •
Telephony Services: Fixed and Mobile , under brand TATA Indicom Media and Entertainment Services: Satellite TV Data Services: Leased Lines, Managed Data Networks, IP/MPLS VPN, Dial-up Internet, Wi-Fi and Broadband under brand photon plus & pro. Value-Added Services: Mobile and Broadband Content/Applications, Calling Cards, Net Telephony and Managed Services
•
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•
Infrastructure Services: Submarine Cable Bandwidth, Terrestrial Fiber Network and Satellite Earth Stations and VSAT Connectivity
LOCATIONS: - USO Circles: TTSL have a strong USO base in 215 SDCAs across 9 circles viz. Rajasthan, MP, Bihar, UP E & W, Punjab, Haryana, Karnataka and Maharashtra.
4.
Different Marketing Channels at Tata Teleservices:
For Tata Teleservices, The telecom operations are carried out in two formats: • • Postpaid Prepaid
Both the formats have different sets of customers and also different sales and distribution system. 4.1 Postpaid
12
Unlike prepaid which is available through a huge network of retailers, post-paid cannot be sold through the general retailers because of Bill Collection and stricter Verification process. Postpaid customers form a low percentage of customer bases but are high revenue generating and hence are treated as ‘Exclusive Customers’. With switching cost in Prepaid being almost negligible nowadays, these customers offer a much higher level of loyalty and hence are given special treatment by the telecom companies. The Average Revenue per User (ARPU) is much higher for postpaid customers than prepaid customers. Postpaid sales and distribution is generally done through the following channels
? DSA (Direct Sales Associates) ? DST (Direct Sales Team)
? Modern Trade
? Exclusive Stores (Company owned outlets)
Channel Partners in Postpaid Sales and Distribution
Direct Sales Associate: As the name implies the DSA sells new connections to the potential customers directly. The DSA approaches the customers through sales agents. The database of potential customers is generated through the following means: • • Existing database from past or current businesses Cold Calling
13
•
References
Direct Sales Team: The modus operandi of a DST is similar to a DSA. The difference lies in the management aspect of the sales force. In case of DST the sales force is managed entirely by a representative from the telecom company. The DST’s chief responsibility is to finance the whole process. Modern Trade: It includes stores like The Mobile Store, Planet M, Big Bazaar, Vishal Megamart and other multi brand outlets which sell a variety of products. The stores may be locally present or may have national presence. These stores generally have tie ups with the telecom companies directly. Exclusive Stores/ Hubs: These are company owned outlets and offer extra services like customer care and bill collections. Due to geo-limits Postpaid connections are not available in all the places like Prepaid connections. There are constraints in bill collection and bill delivery which is a prime reason for non-availability of Postpaid connections in all areas. 4.1.1 Direct Sales Associate (DSA) A Direct Sales Associate is an individual or an organization which sells a product or a service directly to the customer. A DSA maintains a sales force which interacts directly with the customer and markets the product or the service. In the telecom sector, a DSA plays a major role in selling Postpaid connections. Major percentage of sales comes through the DSAs. A good DSA has the following features: • • • • • Good reputation in the market Huge potential customer database which is complimentary with the requirements Experience in the distribution area An efficient sales force Investment ability
14
•
Self involvement in the business
The DSA has the following responsibilities:
•
Approach Potential Customers: In order to sell new connections, the DSA has to approach customers through its sales force and explain the various plans and also the benefit.
•
Manage the Sales Force: The DSA has to manage the sales force and make sure that the team achieves the target. The work of the sales force must be monitored periodically.
•
Bill Collection: The telecom company’s responsibility is to send the bill to the customer. Once the bill is sent the DSA has to send a person to collect the bill amount from the customer. The telecom company appoints a representative who acts as an interface between the DSA and the company.
4.1.2 Modern Trade Marketers of every hue and colour — banks, credit card companies, cars, airlines are trying to grab the opportunity to interact closely with their target audience. Be it cobranding activities with retailers, the selling of wall space within outlets, signages, endof-aisle spaces, carry bags, trolleys or even in-store TV - Modern Trade is acting as the medium for brands to connect directly with consumers. For retailers it is a revenue stream that is fast becoming a steady pipeline. For them, this means the formation of a regular revenue pipeline; for brands it serves as a conduit to directly interact with the customers. There is a growing realization that brands have to be built in a retail environment, and therefore brands undertake activation initiatives to engage customers. Experts believe that retail will eventually become an important medium, helping expand the advertising pie. The idea behind Modern Trade store is to generate profits by maximising the retail space as well; it’s about space selling or space value enhancement. Within an outlet, there are many opportunities like signages, end-of-the-aisle promotions, wall space and even
15
trolley stickers which brands can take up. In any category, consumers have no restriction on the choice of brands. So if at that time a brand can connect with the consumer, it’s more likely to hit bull’s-eye. That’s what modern trade allows brands to do. Retail spaces are being increasingly utilised to undertake short-term activities like launches and co-promotions. In all tie-ups, care is taken to ensure that there is synergy between the two brands.
Distribution in Modern Trade: Modern trade is the latest concept that has emerged as an attractive platform to increase their sales. As discussed above there are certain modern trade stores which have national presence and some have local presence therefore; the distribution channel for Modern Trade should be different.
a. HO to HO connection: In certain Modern trade stores a head office to head office
tie-up is required. A ‘Vendor Format’ is exchanged for this purpose and an agreement is reached upon. A central agreement is advantageous since once this process is completed a new agreement is not needed whenever the telecom operator launches its service in a new region.
b. Indenting for new stock: In order to indent for new connections the Store Manager
of a particular store sends the request to Operation in-Charge of that particular area or region. The in-charge combines all the requests and makes a master sheet which is sent to the head office. The final decision regarding the total number of new connections that should be sent lies in the hands of the head office and is determined by the past sales record.
c. Rising of Purchase Order (PO): Once the master sheet is received at the head
office of a particular modern store they raise a PO to the regional office. Once they get a Purchase order (PO) it was further send to Operation head and the respective company.
d. Collection of SIM cards: Once the operation head gets the PO it’s his duty to
collect and allotted number of SIM cards to particular outlet.
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Mode of Payment The mode of payment is simple and straight – Advance Payment. For all orders (purchase of new sim cards, recharge vouchers) the payment has to be made in advance. Once the payment is received, the order is dispatched. Collection of CAF forms: Different companies have different system for CAF collection. Few companies have a dedicated person who collects all the forms while some require that the store sends all the CAFs to the company through courier and the courier charges are reimbursed as per the agreement. Commission System: As far as the Margin is concerned it also has different methods: • • It can be Fixed irrespective of the number of new connections sold It can be a combination of both (Fixed + variable) i.e. its fixed for
particular number of connections and after that its variable for every extra connection sold • It can also be slab wise
Table 3.1: Sample Commission Slabs
Range 0-100 100-200 >200
Commission per new Connection (Rs) 500 600 700
Operational Analysis of Modern Trade Stores The operations of modern trade stores vary from store to store. There are few stores like Vishal Megamart, Koutons where the tie-up is at the local level while stores like The Mobile Store, Big Bazaar require a national level tie up.
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The Mobile Store: The Mobile Store is a one stop shop for all needs related to Mobile Phones. The store sells handsets of various brands and also sells accessories as well as new connections. The Mobile Store has a national presence and has stores in major cities of India. For a telecom operator to sell its connections through the mobile, store a tie up at the national level is required. A vendor format is exchanged between the Head Offices of the two organizations. The new connection procurement is at the regional level. The Mobile Store sells FOCC (Free of Cost Connections). The customers get new connections free of cost and have to do a first recharge at the store. A representative from the telecom company generally collects the CAF (Customer Application Form) from the store or the CAFs are sent to the company through courier. Big Bazaar, Pantaloons: The mobile section of these stores is managed by the Future Group under the brand name ‘Mobile Bazaar’. The store sells mobile handsets, new connections as well as accessories. All the three stores have national presence and Big Bazaar is the most widespread. A national tie-up is required between the telecom operator and the Future Group in order to sell new connections through the three stores. The Mobile Bazaar is managed by the employees of the Future Group. Planet M: Planet M has recently entered the telecom sector and apart from selling audio and video CDs and DVDs, it now sells mobile handsets bundled with a new connection (currently the tie up is with Airtel) as well. Planet M also has national presence and is the market leader in audio and video retailing. The tie-up is again at the national level between the telecom operator and Planet M. Spencers: Spencers is owned by the RPG Group and is a superstore which sells a variety of items ranging from grocery to electronics to garments. Spencers provide floor space for various branding activities.
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4.1.3 Exclusive Stores/ Hubs
This is a new format which has recently evolved and is more customers oriented. The exclusive stores may be Company owned or privately owned. The Company owned outlets sell new connections as well as provide customer service. The Privately owned outlets generally sell only new connections but may provide customer service as well. The Post-paid Bill Collection process is carried out by these exclusive stores/hubs. The stores are designed as per the norms set by the telecom company. They provide extensive information to the customers about the existing tariffs and offers, VAS and also take care of customer complaints.
4.2 Prepaid Prepaid customers form the major chunk of the customer base. Almost 90% of the customer base is formed by the prepaid customers. A prepaid customer can be anyone from any income group. Prepaid Sales is carried out through the following channels: • • • Retailers Modern Trade Exclusive Stores /Hubs
19
Channel Partners in Prepaid Sales
Shown below is the flow of the Prepaid Sales and Distribution System
20
Prepaid Sales and Distribution System
Prepaid distribution system differs from Post-paid distribution system. Unlike the latter Prepaid distribution has more involvement from both from inside and outside company such as Retailer, DSE, Distributor, Sales Force etc. Due to involvement of so many people designing a prepaid distribution takes lot of time and demand huge experience. Also the process involves many new activities which are not there in post-paid. Below we have discussed the activities in brief: 4.2.1 Retail Mapping There are a number of retail outlets (all those who sell new connections and/or recharge vouchers) present in a city but in order to know the exact number of retail outlets the exercise of ‘Retail Mapping’ is done. This activity helps in the following information about the outlets: • • • Outlet name Owner name Contact number
21
•
Total number of new connections sold per month (including individual information for all operators)
•
Total amount of recharge (easy, paper) done by the retailer per month (including individual information for all operators)
• • • •
Present inventory of all operators Place for outdoor and indoor branding Type of existing boards i.e. non lit or GSB (glow sign boards) Type of board that can be placed
To collect the above information a Retail Mapping Format is specially designed for this purpose. As it is an important activity hence it needs to be carried out very carefully and on an average one person can only collect data of 35-40 retailers in a day.
Allotment of Retailers to Different Categories Once the retail mapping activity is over, all the retailers are divided into different categories based on the number of activations they do. Following is the categorization:
•
A+ >= 200 connections A > 100 <199 connections B > 50 < 99 connections C > 15 < 50 connections D < 15 connections
• • • •
Once retailers are allotted in different categories the total number of outlets in a particular category can be obtained. This categorization helps in Beat Planning. 4.2.3 Beat Planning
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This is the most challenging and crucial activity as it involves lot of experience and brainstorming. Before understanding what is beat and how beat planning is done relationship between them must be known: o 1 Grid = Minimum 2 Sub grid o 1 Sub Grid = 1 Beat o 1 Beat = 2 Sub Beat Sub Beat: One sub beat means the total number of retail outlets a beat boy can visit in one day. Total numbers of retail outlets that fall under one sub beat depend upon few things: o Area to be covered o Number of outlets in that area Total number of outlets may vary due to above mentioned points but for average we take it 30 retail outlets. Beat: It is the total number of retailers a beat boy or DSE (direct/distributor sales executive) can visit. As already stated that one beat consist of two sub beats but the average number of retailers that fall under one beat are 55 which is less than 60 (total of two sub beats). This is because within sub beat there are certain outlets which fall under A+, A and B category and according to the company’s norm: o A+, A and B category retailer are to be visited daily o C and D category retailers every alternate day Therefore, there is a difference between the actual total number of retailers that fall in beat and the total theoretical number of retailers. 4.2.4 Distributor Selection In broader sense the process of selecting a distributor in prepaid and postpaid is nearly same. The major difference lies in the type of distributor one prefers. For prepaid
23
distribution system FMCG distributors are more preferred. But there can be exceptions if the distributor is well reputed and has a huge distribution network. Given below are few points which are considered before looking for a distributor: • • • • • An experience of more than 2 years in distribution Preferably not engaged with any other telecom operator A good infrastructure in place Good sales force Willingness to make investments
4.2.5 Distribution System As already discussed that Prepaid Distribution involves many people from both within and outside the company therefore it is very important to have a secure and well planned distribution network. To avoid confusion and facilitate tracking each and every Retailer, DSE and Distributor is provided with ‘Unique Number and ID’. This unique number/ID also helps in finding out the various transactions which has taken place. Distributors can track only those retailers and DSEs which fall under their area or directly working under them respectively. Similarly DSEs can track only those retailers who fall under their area. Once this activity is completed the distribution becomes very simple. The various steps involved in distribution are: • Distributor sends an advance payment to company through RTGS/DD/Cheque along with the requirements. • Once the payment is received the company dispatches the order to the distributor through appropriate means. • Distributor maintains the inventory and distributes it through the DSE.
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•
DSE visit retailers according to the beat plan and deliver the required order and collect payment.
•
They pass on all the information to retailers regarding the recent schemes and also take new order.
In telecom industry products and schemes change rapidly, hence it is important that all concerned people are updated about the same at the appropriate time. For this messages and calls are made to the retailers as and when required.
25
5. Competitor Analysis: In this section, the major competitors like Airtel, Vodafone and Aircel are analysed. Their channel model and strategies are understood. Some Important facts about competitors are: • • • TATA GSM is the late entrant in Market so stiff competition is there. Major Competitors are Airtel, Vodafone, Aircel, Reliance, MTS, and Virgin etc. Tata should do Benchmarking with the dominant players like Airtel, Vodafone, whereas TATA should also examine the strategies adopted by new comers like MTS and Reliance GSM. • Airtel is dominating market with almost 50% MS.
We have analyzed competition under following areas: • • Logistics Model Margins and Incentive Structure
26
5.1 Logistics Model: Competition Logistics model deals with supply pattern to MT chains, CAF collection process and man-power support given by Competition to the modern trade outlets. Basically Competition serves telecom market in two Supply formats: 1. Direct supply through company 2. Distributor Supply
Both direct supply and distributor supply has their own pros & cons so TATA have to trade-off between our MT accounts and supply patterns. We have identified the supply pattern (Direct/Distributor) of the competition to the different chains as per their business potential. We have also identified the CAF collection process of competition and man-power support given by competition. Results are shown in the table below:
AIRTEL
DIRECT SUPPLY (SIM,EC,HANDSETS) Univercell, Mobile Store, RPG Cell u com, HotSpot
AIRCEL
Only Univercell has now tied with Aircel for Direct
VODAFONE
Mobile Store and One Mobile
Hash 10, Poorvika, Techno Park, Separate distributors for separate DISTRIBUTOR SUPPLY Cell o Cell, Vivek, chains WaveTel,Sangeetha NO OF DISTRIBUTORS MANPOWER-CSM MANPOWER-DSEs 1(Hello Telecom) 4 (3-chennai, 1-ROTN) 10 ( 8-chennai, 2 -Rotn) 4 ( Each distributor supplies to 2-3 Chains) 2 (1-chennai, 1-ROTN) DSEs of respective distributors
Single Distributor: Rocky Agencies supplies to all Chains except Mobile Stores and One mobile 1 ( Rocky Agencies) 2 (1-chennai, 1-ROTN) 8 in chennai & rotn distributor DSEs are involved The DSE's take care of CAF collection
CAF COLLECTION
LCS FINANCIAL SERVICES COLLECTS CAF FOR AIRCEL,AIRTEL,TATA CDMA.THIS AGENCY COLLECTS CAF FROM ALL CHAIN STORES
Analysed facts from the table
27
•
Competition has chosen different approach for different chains as per the account type ( National/Regional), Cost benefits, control benefits, Business Potential etc. ex. Vodafone supplies through distributor – Rocky agencies, while Airtel supplies directly for National accounts, TMS & Univercell but for small accounts they also go with distributor supply.
•
Airtel & Aircel collect their CAF through a third party named LCS which protect them from the hectic work of CAF collection and enables them to keep more focused on their core business.
•
Vodafone collect CAF through DSEs, as it will help to stabilize the constant relationship with customer and also helps to reduce CAF rejection rate. TATA Logistics Model
Merits of Logistics Model: • • • MT chains have been categorized as per business size and will be served accordingly. National Partners & Univercell will be protected with Direct Supply. Local chains will be covered with a dedicated MT distributor.
28
• •
Universal & TMS contributes 65% business so will be given special focus in service, promotions & incentives. CAF collection will be outsourced to ensure more focus on our core business & ensure hassle free CAF collection
29
5.2 Margins and Incentive Structure: Competition
MT Telecom Industry works hand-in-hand with distributors and retailers. Distributor and Retailer both play an important role as channel partners to bring numbers to the operators. So, Most of the operators seems to give special focus to the incentives and margins of channel partners to keep them happy and generate higher throughput. We have analysed the competition offering to the retailers & distributors and proposed our margin & incentive model that should be followed by TATA in order to differentiate itself and serve the market in much better way. Our analysis shown in the below tables:
Margin Structure
Model Distributor supply Direct supply Channel Margin Distributor margin(%) Retailer margin(%) Retailer margin(%) AIRCEL 2.25% 3.80% AIRTEL 1.50% 3.80% 4%-5.5% VODA 1.75% 3.50% 5.00% TATA 2.00% 3.50% 5.50%
Incentive Structure
Incentive Structure AIRTEL 75-150
MT Chains Standard
AIRCEL 50-100
VODA 50-100
TATA 125
•
Competition is offering different margins to different retailers & distributors as per their strength. Above mentioned figures are industry standard figures. Actual figures are not shown to maintain confidentiality.
•
Competition is seems to offer mostly slab-wise incentive structure to different retailers & distributors as per their strength. Above mentioned figures are industry standard figures. confidentiality.
30
Actual figures are not shown to maintain
Merits of the Structure
•
Proposed Margins & Incentives are decided such that, TATA will be able to differentiate itself with respect to competition offerings and able to generate large business volumes.
•
Simple but slab based incentive model (slabs are not finalized yet) is suggested to control unnecessary confusion & to avoid channel conflicts.
6. Conclusion
Thus we saw how the business model works for Tata Teleservices. We analyzed other competitors and compared the functionalities of TTSL with them. Various distribution channels and its effect on both postpaid and prepaid services revealed how important the distribution channels are in terms of market reach and revenue generation. Studying logistics model helped to understand the logistic dynamics of the whole business. Also there is a growing realization that brands have to be built in a retail environment, and therefore brands undertake activation initiatives to engage customers. This we saw by studying a concept called ‘modern trade’. Thus looking at the overall picture it seems that TTSL has still a long way to go to achieve breakeven and come at par with Bharti and Vodafone but through capturing the Indian mass through utility, affordability and sentimental values it can reap long lasting benefits.
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References:
1. http://www.tata.com/ : Official website for TATA GROUP 2. http://www.tatateleservices.com/ : Official website for TATATELESERVICES 3. http://www.tataindicom.com/: TATA INDICOM Official Website 4. http://www.dot.gov.in/: Official Website of Department of Telecom 5. http://www.trai.gov.in/:
Official
Website
of
TRAI(Telecom
Regulatory
Authority of INDIA)
6. http://www.airtel.in/: Airtel Official Site 7. http://www.vodafone.in/: Vodafone Official site 8. http://www.aircel.com/: Aircel Official site
9. Official sites of other operators
10. http://www.univercell.in/: Univercell Official Site 11. http://www.themobilestore.in/: The Mobile Store Official site
12. Official Sites of other MT CHAINS
13. http://www.indiastat.com/ : Statistical reports about telecom industry
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