Why did Tata Docomo fail?
Tata Docomo was one of the top telecom companies in India and the one paisa per second plan of Tata Docomo was one of the revolutionary plans in the telecom sector.
The real name of Tata Docomo is Tata Teleservices. Ratan Tata started this company in 1996 and it used to provide broadband and internet services all over Mumbai and within the next 10 to 12 years they had expanded the network to the whole of India. In 2008 NTT Docomo which is a Japanese company bought 26 percent equity under Tata indicom which was a subsidiary company under Tata teleservices and the value of this deal was 502 billion rupees and then name of Tata indicom changed to Tata Docomo and from then it was operated under the name Tata Docomo. At the same year Tata Docomo made a partnership with mobile company of Richard Branson and brought CDMA (code division multiple access) services in India.
What is the difference between CDMA and GSM?
During olden times only two phone protocols were used CDMA and GSM the quality of call under CDMA used to be great but one down fall of CDMA was that data and calls would not work together under CDMA when the era of data started GSM was introduced GSM is global system for mobile communication which is cheaper than CDMA and you can use call and data both together.
CDMA services were one of a kind and very beneficial but they could not market CDMA as much as GSM operators. Tata’s had broad advance technology which they brought in India but it was expensive and as we all know that India is yet on a developing stage hence there are more number of middle class people who cannot afford high prices for calls or internet they could not use it and eventually the customers for Tata Docomo reduced and hence the company incurred a huge loss.
How did Tata Docomo revolutionize the whole telecom sector?
When Tata Docomo started their services in India the drilling plan was one paisa per second. Ratan Tata knew that this plan would regularised the whole of telecom sector and that is what happened.
Before Docomo the smallest measurement to measure any call was a minute and even though you are talking for even 5 seconds you would have to pay for whole minute and if you would talk even 2 seconds more than 1 minute then you would have to pay for 2 minutes. In this scenario operators were earning a lot but customers were at loss. one paisa per second plan was made so that this loss would be turned into an opportunity and this plan was a revolutionary change for the telecom industry.
This plan cost big telecom services like Airtel and Reliance to rethink strategies to come back into the race of telecom services because new player like Docomo had taken away a huge amount of market share so in order to keep up with this plan other operators started to make new plans which were at a similar range due to which even the lower section of market started getting opportunities to use these mobile services and this one change raised the mobile users of India from 25% to 43%. Due to this new change, every year 15 million new users who used mobile services were added. Comparatively in Europe only 1 million were added and in US only 3 million.
India was growing five times at this point of time in the sector of telecom and mobile services users and Tata Docomo did not stop here.
Tata Docomo came up with new plans like pay per site to surf the internet plan.
Under this plan you would be charged only if you visit any site and at the end of the month. no data left per second plan’s success gave Tata Docomo a huge customer base and in order to maintain and retained this base they launched price recharge coupons ttsl services consisted of CDMA services call services and other Wi-Fi products,non voice services, e governance services, m2m machine to machine services due to which public and government security improved a lot.
Tata Docomo brought such a phase in telecom services which is still known as the golden age
But even after all these things Tata Docomo was still into loss because making everything cheap always doesn’t help you gain profit always, just like how everyone is not jio. So in order to sell so good and better CDMA services they had to pay from the own pockets and the plan was that they would gain eventually a huge number of subscribers due to which they would later become profitable but this never happened but the financial backing was very strong the whole Tata group was behind their back but since 2010 the things were so low that it was difficult to recover the losses.
The Cellular Operators Association of India took away voting rights of ttsl because they were unable to pay their dues.
According to Tata they were unethically and undemocratically banned and the association was biased with Tata and they quoted that
“The Cellular Operators Association of India‘s main concern was the myopic growth of a few telecom operators.”
Which means that the main purpose of the organization was to be biased and push support the growth of a few operators and no one knows the reason behind this favouritism.
In December 2012 Tata teleservices limited withdrew its application which offered 800 megahertz CDMA services in order to create pressure on government to cancel the auction of CDMA spectrum.
During this two players Videocon and ttsl withdrew from the auction in support of GSM because they knew that CDMA will not work for a long time enhance in the year 2011 CDMA services which work under Ttsl and gms services which work under Tata Docomo were merged so that they could cut jobs. Hence Tata became a GSM operator completely and the dream to become the king of cdma services field was shattered.
There was a bigger shock which was in 2014.
NTT Docomo applied that they wanted to decommission their services because they were facing continuous losses because of their partnership with Tata
NTT Docomo gave a time period from July 2014 to December 2014 to Tata to search for buyers to buy Docomo stakes or to rebuy their stakes from Docomo to which they failed and Docomo filed a case against TTSL at London court of international arbitration. Some more time passed and it was 2015 and even the RBI refused to buy the Docomo stakes from ttsl which were valued 7250 crore rupees. Due to all these reasons and the case in London in June 2016 the collaboration of ttsl and Docomo was over.
Even after all this till 2017 there was still a lot of conflict going on regarding the shares and buyers between Docomo and tata until Tata settled it’s issue under competition commission of India and eventually Tata bought back its shares as a comeback. ttsl offered 3G services unlimited calling packs and department of telecom was paid 45000 crore rupees to give them the permission to renew their 1800 megahertz band spectrum in order to recover ttsl into market.
According to the reports eventually Tata could never recover from this incident and Tata Docomo was never profitable and in order to stop this losses Tata finally announced its merger with Airtel in October 2017 and all the customers of Tata Docomo were converted to Airtel.
And within blink of eyes Tata’s efforts went under the name of Airtel. At this time even Airtel needed this because on the other end jio was getting better and a difficult competition for Airtel. According to experts “Tata was one of the initiators of price war in the Indian market, but they themselves got hit when new players came in 2008. They started losing money and every new customer acquisition became costlier. When Reliance Jio came, the wedge between the average and the better player just increased; it weakened them beyond repair.”
After the entry of jio, ttsl was completely closed down because Tata could not fight with the services provided by jio and as we say this was the final nail in the coffin for Tata Docomo.
What was the major factor for decline of Tata Docomo?
It was unavailability of flexibility. According to Alok Shinde decision making of Tata Docomo was very weak and whenever the competition would take a new decision in their business, they would take a long time to implement it into the business and as a result when there was not much strength left into the business they had to eventually merge with Airtel because they neither had a strong user base nor any brand value.
If we observe carefully jio and Tata Docomo were both the companies which were new in the telecommunication and came up with new plans and a huge revolution in Indian market resulting in failure of Tata Docomo and jio being super hit.
