As a part of the understanding, Japanese mobile operator NTT Do-CoMo has agreed to let Tata use the brand name in lieu of what is called a "marginal royalty", which will push up what the Tatas may need to pay if they have to buy back NTT DoCoMo's 26.5% stake in the joint venture, a senior official in Tata Teleservices (TTSL) told ET.
"The target is to retain the brand name at least for the next one to two years because the numbers (for TTSL) are looking up," another person said. It may also be noted that the company moved its Rs300 crore advertising account from FCB Ulka to Contract Advertising about a month ago. DoCoMo last month announced its decision to exit the lossmaking TTSL. This means the Indian conglomerate has to either buy the stake or find a buyer for it under their 2009 joint venture agreement.
According to the pact, if a buyer can't be found by June end, the Tata Group has to pay the higher of a market-linked price or at least Rs7,250 crore, which is half the investment NTT DoCoMo had made in the JV. With the marginal royalty for using the brand name, the payout by Tata will now be slightly more.
A new brand name and marketing around it will not only delay the customer acquisition target but will also require more investment, which the loss-making company is not in a position to fund. It will therefore be cheaper to retain the brandname rather than investing in creating and marketing a new one, more so at a time when the Tatas are looking to exit the telecom business altogether, the people said.
The person said that while TTSL has appointed Contract as its new agency, it wants to continue with the ongoing advertising strategy for now and not make any drastic changes to its communication plans. "The numbers are looking up for us and this year, in our annual operative plan, we have increased our customer acquisition target by 20-25%.
To achieve that we need to retain the brand name," explained the person cited above. "We have communicated the same to Contract and we will start engaging with the team soon to decide on our new set of advertisements." TTSL had nearly 63 million users services at March end.
Emails sent to Rana Barua, CEO, Contract Advertising, and NTT Do-CoMo did not elicit responses. Tata Teleservices declined to comment. While for some categories it is easier to make a brand change, in telecom, the transition needs to be gradual, said brand consultant, Harish Bijoor, CEO, Harish Bijoor Consults. "The Tatas are following the best standards of conservative branding practice. When there is a truncation, do it slowly."
The company should use the "just noticeable difference" kind of branding transition. "I guess there is good reason here. From a pure lay consumer point of view, Tata Teleservices is a brand as well. And between just a 'Tata in telecom' kind of image, a 'Tata Docomo in telecom' image is a superior one to date. The Tatas will surely try to milk that image for a while as this transition moves through," Bijoor said.
TTSL has been going through a rough time for several years now, amid intense competition and weighed down by the nearly Rs28,000-crore debt on its books, which together have made its net worth negative. While the Tatas have been reportedly exploring opportunities to exit the sector, the financials make the asset unattractive.
The company in the meantime has been trying to get its act together, streamlining and slashing operations and costs wherever possible, like shutting about 8,000 cell sites in unprofitable areas. It has also signed agreements with rivals Aircel and Reliance Communications to provide coverage where its network has gaps in 2G and 3G. Improving industry fundamentals amid reduced competition has allowed most telcos to cut discounts on calls, thus helping key parameters such as average revenue per user.
While unlisted Tata Tele's numbers aren't public, its listed unit offering services in Maharashtra, Tata Teleservices (Maharashtra), has seen its net loss narrow in the fiscal year ended March 31 from a year back, indicating early signs of improvement. While for some categories it is easier to make a brand change, in telecom, the transition needs to be gradual, said brand consultant, Harish Bijoor, CEO, Harish Bijoor Consults. "The Tatas are following the best standards of conservative branding practice. When there is a truncation, do it slowly."
The company should use the "just noticeable difference" kind of branding transition. "I guess there is good reason here. From a pure lay consumer point of view, Tata Teleservices is a brand as well. And between just a 'Tata in telecom' kind of image, a 'Tata Docomo in telecom' image is a superior one to date. The Tatas will surely try to milk that image for a while as this transition moves through," Bijoor said.
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