Chennai: Tata Teleservices, a fixed-line telephone service provider, will start connecting people of Tamil Nadu from the middle of this year. The company will offer services like fixed line, fixed wireless services (popularly known as wireless in the local loop [WLL] or limited mobility], ISDN, leased line and data centres. With Tata Internet Services under its fold, the company will also offer Internet connectivity.

The company had offered similar services to over 1 lakh subscribers in Andhra Pradesh, and procured the licence to operate in Tamil Nadu, Karnataka, Gujarat and Delhi in August 2001. Says Tata Teleservices COO (Tamil Nadu circle) R Balachandran: We plan to invest around Rs 1,000 crore in Tamil Nadu over a period of five years to become a complete telecom company. After being away for a short while, implementing a broadband project for British Gas in Gujarat, Balachandran is back to the telecom industry. He was earlier with Suntel as its director (marketing, sales and customer care). Suntel, a basic services player in Sri Lanka, is a subsidiary of Telia, Sweden. He says Tata Teleservices has paid an entry fee of Rs 50 crore and has offered a bank guarantee of Rs 400 crore.

The company is negotiating with equipment-vendors, and a final decision on choosing a technology will soon be taken. The company has sourced its infrastructure needs from Lucent Technologies, Schlumberger, for the smart card-based PCO network Kennan for billing systems and Tata Consultancy Services for integrated solutions.

Fundamentally we are looking at code division multiple access (CDMA) technology, as it has a better capability. But the choice of technology also depends on the markets, he says when asked about the choice of technology the company plans for WLL services. Tata Teleservices is not averse to share the already existing or upcoming infrastructure for a fee. Talks have been initiated on the subject with some players.

With long-distance tariff rates coming down, a decision is yet to be taken whether to have one big data centre hub or to have the centres spread out in different cities. Tata Teleservices hopes to start generating operational profits by the end of the second or third year, while it will take six years for the project to break even.

We will roll out our services initially in Chennai and other important cities in Tamil Nadu, he says. Within seven years the company, as per the licensing agreement, has to cover all the 113 short-distance charging areas (SDCA) in the state. We will initially target corporates - big, medium and small - and other high-telephone users. For a faster market penetration Tata Teleservices is in the process of appointing franchisees in the state to set up retail outlets. Balachandran says each franchisee will have to invest around Rs 10 lakh towards space and other basic infrastructure and should be financially sound. The company is yet to freeze the number of franchisees to be appointed in Tamil Nadu.

Quality of service, cost to the consumer and speed to the market will be our USP, says Balachandran when queried about the competition from BSNL, four cellular players in the state and the likely entry of Bharti Televentures and Reliance into the basic services.

In the fixed-phone services Tamil Nadu is one of the highest revenue earners for BSNL, and Chennai, with 1.9 million connections, ranks first in respect of the average revenue per user. Similarly with 155 telephones per thousand, Chennais tele-density is higher than that of Mumbai and Delhi.

There are about 3.5 million telephone lines in the state, contributing an average revenue of Rs 800 per month. This works out to Rs 280 crore per month and Rs 3,400 crore a year. If one adds the revenues of the cellular players, the total telecom market size in Tamil Nadu goes up to Rs 4,000 crore. And the market is growing, says Balachandran.