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Opportunities that Ratan Tata missed

Last updated on: December 28, 2012 10:17 IST

Opportunities that Ratan Tata missed

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Bhupesh Bhandari in New Delhi


On November 15, 2010, Ratan Tata delivered a lecture on "India in the 21st century: opportunities and challenges" in Dehradun, the capital of Uttarakhand.

The lecture would have gone unnoticed, had Tata not revealed that he thrice tried to get into civil aviation but his attempts were futile because a minister demanded to be paid Rs 15 crore (Rs 150 million) in bribes and he refused to do so.

"We approached three prime ministers also, but an individual thwarted our efforts to form the airline," he said. "I did not want to go to bed knowing that I set up an airline by paying Rs 15 crore."

This kicked up a storm. Some people urged Tata to name the minister, given the strong anti-corruption sentiment in the country. Others said there was no point speaking out against the misdemeanour ten years later.

Yet, it was a rare admission of missed opportunities in Tata's 20-year-long career as the chairman of Tata Sons.

As he takes stock, Tata will surely feel good about many of his initiatives: the transformation of Tata Steel and Tata Motors, growth of TCS, expansion of Tata Tea et cetera.

On the flip side, his domestic car business has failed to live up to the initial promise of two high-profile launches (the Indica and Nano), he exited FMCG (Tomco and Lakme) and missed the boom, his housing initiative is yet to attain scale, his pharmaceutical foray (Advinus) is yet to get into the big league, his telecom companies are way behind the leaders, and his aviation plans just couldn't take wings.

Ta-Ta, Ratan: Tribute to an iconic Indian

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Image: Ratan Tata.
Photographs: Danish Siddiqui/Reuters

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Opportunities that Ratan Tata missed

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JRD Tata had started India's first commercial airline, Tata Airlines, in the 1930s. After Independence, it was nationalised and renamed Air India.

Though the Tata group was out of the airline, the business always remained close to its heart. In the 1990s, when the sector was opened up for private companies, Tata knew the time had come.

He quickly put together an alliance with Singapore Airlines to start a domestic carrier. Then the laws changed overnight.

Foreign airlines were barred from owning even a single share in a domestic carrier. Tata's proposed airline with Singapore Airlines never took off. Who stymied the plans?

Maharaj Kishen Kaw, a former bureaucrat who was the civil aviation secretary when Inder Kumar Gujral was the prime minister (April 1997 to March 1998), in his recent book, An Outsider Everywhere: Revelations by an Insider, has said that it was the handiwork of Tata's rivals.

"The Tatas had mooted a proposal for a private airline with 40 per cent equity contribution from Singapore Airlines. As this would have been a formidable competitor, Jet (Airways) tried hard to upset rules regarding foreign equity contribution," Kaw wrote.

He said that CM Ibrahim, the then civil aviation minister, was not convinced about the Tata proposal. "The minister did not clear the file, despite several attempts on my part," Kaw added.

The sector, of course, is mired in losses. It's not sure if the stillborn proposal was a blessing in disguise.

Ta-Ta, Ratan: Tribute to an iconic Indian

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Image: Tata Airlines was nationalised and renamed Air India.
Photographs: Reuters

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Opportunities that Ratan Tata missed

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Telecom is a different story. Tata Teleservices has 76.7 million subscribers (as of October 31, according to the Telecom Regulatory Authority of India), which puts it in the fifth slot after Bharti Airtel (186.4 million), Vodafone (153.1 million), Reliance Communications (134 million) and Idea Cellular (115.7 million).

Tata Teleservices, in the early years had taken the CDMA route, and not GSM, to mobile telephony. Though highly efficient for transmitting data, CDMA suffered from some drawbacks.

For example, the handset came bundled with the service. Two, a royalty had to be paid to Qualcomm, the service provider, which eroded the profits.

The future was with GSM. The window of opportunity to launch GSM service showed up in 2007 when the department of telecommunications, under Andimuthu Raja, decided to allot GSM spectrum to CDMA players at Rs 1,659 crore (Rs 16.59 billion) for all of India. Things went awry for Tata Teleservices right from the start.

On October 18, Raja, while approving the sale of crossover spectrum noted on the file that "for allocation of spectrum, the date of payment of required fee should determine the seniority".

Three CDMA service operators, Reliance Communications, Shyam Telelink and HFCL Infotel, had applied for GSM licence in 2006.

In-principle approval was granted to these three on October 18 itself, though the press release to this effect was only issued the next day. On October 19, Reliance Communications deposited the fee of Rs 1,645 crore (for 20 of the 22 telecom circles) and came right on top of the queue for spectrum.

Ta-Ta, Ratan: Tribute to an iconic Indian

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Image: Tata Teleservices started out as a CDMA player.
Photographs: B Mathur/Reuters

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It was allotted spectrum on January 10 and 11, 2008. Tata Teleservices applied on October 20. Now, Raja decided to change the policy and clubbed Tata Teleservices with other seekers of spectrum.

He gave in-principle approval to Tata Teleservices's proposal only on January 10, 2008, when the company was required to deposit the licence fee.

Its applications were received at DoT's reception counter and further delivered to the office of the wireless advisor. Then, from there the applications went missing!

On December 8, 2010, Tata wrote to Rajeev Chandraskehar, who had accused of incorrectly grabbing spectrum under the crossover window: "The company (Tata Teleservices) has strictly followed the applicable policy and has been severely disadvantaged, as you are well aware, by certain powerful politically connected operators who have wilfully subverted policy under various telecom ministers, which has subsequently been regularized to their advantage.

The same operators continue to subvert policy, have even paid the fee for spectrum even before the announcement of policy and have 'de facto ownership' in several new telecom enterprises."

Tata Teleservices had not got spectrum in Delhi and some other circles even three years after the announcement of the policy. Tata added.

In telecom, lobbying is everything.

Ta-Ta, Ratan: Tribute to an iconic Indian


Image: Former telecom minister A Raja.
Photographs: Reuters

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