BW Communities

Is Peptel Losing The Plot?

BW Online Bureau Nov 08, 2014

<div>Peptel's Chairman & CEO Suneet Thomas was reading the Q4 results of the company. For the second consecutive quarter, the company had posted losses. The performance in the previous two quarters had also been bleak.  This was perhaps the worst year for Peptel, since the private telecom giant started its operations in the year 1983. Thomas was worried. The industry data was also lying on his desk and it did not have anything to raise his spirits either. The data clearly showed that the company had lost almost 1 million mobile customers in September. As he looked outside the window of his plush office on the 25th floor of the Peptel House located in the heart of the commercial capital of India, Mumbai, he wondered what went wrong. The competition had definitely increased, the political and policy scenario had changed but all this had been taken in stride by Peptel in the past as well. Then what was wrong? Why was the company posting losses? Why was it losing customers? Could the loss of customers be attributed to the number-portability policy brought by the government, whereby mobile consumers could change their operator without really changing their mobile-number .But then number portability has been there for quite some time now and Peptel's customer retention in the early days of number-portability had been quite impressive, compared to other operators. In fact last year, Peptel ended up gaining more customers than losing them to competition. Then, why this suddenly this exodus? Was there any correlation between the financial performance of the company and the erosion of the customer base? Thomas realised the need to go down to the root of the problem and fix it before it was too late. Thomas had called for a meeting of the entire top leadership at 3 p.m. later in the day. The Chief Marketing Officer Govind Natarajan, the Chief Financial Officer Ishaan Kapoor, the Chief Operating Officer Vinay Murthy and the Director — HR Meeta Guha had been summoned by Thomasfor the meeting. Early Days Of Peptel There was still time for the meeting but Thomas could not concentrate on anything else. He was restless and did not want to relax until he understood the real problem. He reminisced how he had started this company almost 30 years back.  Suneet Thomas founded the Peptel Group. In 1983, Thomas was in an agreement with Germany's leading company to manufacture push-button telephone models for the Indian market. Thomas incorporated Peptel Telecom Limited (BTL), and his company became one of the first in the country to offer push-button telephones, establishing the basis of Peptel Enterprises. By the early 1990s, Suneet Thomas had also launched the fax machines and its first cordless telephones. In early nineties Thomas won a bid to build a cellular phone network in Delhi. Soon Thomas incorporated the cellular operations as Peptel Tele-Ventures and launched service. By the end of the decade Peptel had extended its service to almost entire the nation. In 2000, Peptel acquired control several small telecom companies. Peptel Enterprises went public soon after and the company was listed on the Stock Exchange. The cellular phone operations were rebranded under the single Peptel brand. In 2009, Peptel launched its first international mobile network. In 2010, Peptel made international acquisitions that made it the largest cellular service provider in in the country and the third largest in the world. Recently, Peptel announced that it had deployed Mobile Broadband Charging (MBC) solution and completely modernized its prepaid services for its subscribers in India. As a part of the deal, multi service MBC suite allows prepaid customers to have personalized profile based data charging plans. Prepaid customers will be able to customize their data plans across mobility, fixed line and broadband by cross bundling across multiple domains (2G, 3G, 4G/LTE & Wi-Fi). It will also offer flexible multi service charging in geographical redundant mode, making Peptel the first operator to implement geographical redundancy at such a large scale. The Meeting Suneet Thomas was very particular about time and everyone in the company was aware about his penchant for punctuality. Besides, the importance of this meeting had not been lost on anyone. The Chief Marketing Officer (CMO) Govind Natarajan, the Chief Financial Officer(CFO) Vinay Kapoor, the Chief Operating Officer(COO) Vinay Murthy and the Director - HR MeetaGuha were all in the conference room good 10 minutes before 3 p.m. Suneet Thomas was widely respected in the industry as well within the company for his innovative business model. In the early days of mobile telephony in the country high tariff rates were a norm. This was largely due to high cost of setting-up of the network. A 'subscriber-led' model had been replicated from richer economies of the developed world that were the first to launch mobile phone services, Europe in particular. Since it was a new technology, the cost of setting up a network was high. In the 1990s, most mobile operators wanted well-heeled customers who would be willing to pay $1 a minute. However such a business model meant that while the cost of setting up the network remained high, very few subscribers signed up because the cost of making or receiving a call remained very high, almost eight rupees a minute. No one in the business was making any money. Suneet experimented with an outsourcing model. The model meant that all of its business operations except marketing, sales and finance were outsourced.Customer support, back-office services, voice-based services, tower infrastructure, software, hardware & IT operations needed for Peptel's operations, network, base stations & microwave transmissions, thought core to mobile telephony till that time, were outsourced by Peptel. The result was a sharp drop in call rates. Consumer base spread like raging fire in the woods and Peptel became a phenomenon. However, low call rates were not the only advantage of this business model. Network availability also improved drastically and anytime, anywhere availability became a reality. The move that had been criticized by the industry stalwarts at a time when Suneet was introducing it, proved to be the shot-in-the-arm of Peptel. Peptel became a household name. Suneet knew that in the future, network management, IT management etc. thought to be the core of mobile telephony would be default strength of any operator. However the leadership would be defined by market share and consumer base. Peptel focused on the same and became the undisputed market leader. The meeting started with usual pleasantries but the mood definitely was more sombre. Suneet Thomas, CEO: Dear Colleagues, I will not mince words. The Q4 results are no secret. We definitely cannot let it slip this way. We have had abad year. Is it just a bad year or there is something deeper in this? I am not sure. I am worried and am sure that all of you are as well. Vinay Murthy, COO: I share your sentiments. I also think there is a sense of urgency. And we have to put our act together. Suneet Thomas:: We need to get to the bottom of this mess and find out where the rot is…else we are doomed. More than the loss that we have posted, I am more worried, with the loss of customers. A million customers! Is this some kind of joke? We are a becoming a leaking bucket. How much time and money would be required to win over a million customers! Losing them happened much faster…and am sure it cannot be just portability factor. Vinay Murthy, COO: I hope I am not being perceived as being defensive. But according to the latest Telecom Regulatory Authority of India data the Teledensity - the number of telephone connections for every hundred individuals living within an area, has dropped sharply. The teledensity stood at 72.9 per cent in February 2013.This was a 6.7 percentage point decline from a record high of 79.6 per cent just nine months ago in June 2012. The number has been falling steadily month on month. A sharp reduction in the number of mobile connections has been primarily responsible for the falling teledensity. Ishaan Kapoor CFO:: Yes, I have also read the report. Large-scale cancellation of telecom licences, following the apex Court's orders after the telecom scam, has resulted in some operators downing shutters in certain areas and others exiting the business altogether. It may be some time before customers, who were left in the lurch after service providers ceased operations, can sign up for a connection again. Since, in our case this does not apply, so how do you attribute the loss of customers to reduction in teledensity? Vinay Murthy:: But that's not all. Look at the industry report regarding the average revenue per user (ARPU), a measure of the revenue generated per user. As of December 2012, the average revenue per user (ARPU) amounted to just Rs 98 for GSM players and Rs 80 for CDMA service providers. This is a far cry from the peak of Rs 366 per GSM user and Rs 256 from CDMA user in March 2006. This indicates that in general the strategy of achieving higher volumes through lower tariffs may have gone a step too far. And like us, our competitors also keen to improve their profitability, have terminated pre-paid connections that were lying idle for long. Then, the monthly mobile phone usage by subscribers indicates that the number of minutes spent by the average user talking on GSM networks has fallen from 505 minutes in June 2008 to 359 minutes in December 2012. And please do not forget that we have increased their mobile tariffs too in the last four months. Suneet Thomas:: Ok, granted disconnection of idle connections, reduction in mobile usage by our subscribers and increase in tariffs would have resulted in loss of some customers. But can we attribute the loss of all 1 million customers to these? Mr.Kapoor, do you have any estimate by which we can qualify these million odd customers that we have lost? Ishaan Kapoor:: In fact, as I told you earlier I have also read the report and had done some research before coming to this meeting. The reasons cited by Mr. Murthy have definitely played a part in drop in number of customers, not only for us but for other operators as well. But in our case, adding-up all these factors, on a very safe estimate the total loss that can be attributed is not more than one-third. In other words, we still do not know why we lost two-third of this 1 million.  </div><div>break-page-break</div><div> Suneet Thomas: That's the point. We clearly have around 0.75 million defections that do not fall under any category stated by Mr. Murthy. I appreciate the analysis both by Mr. Murthy and Mr. Kapoor. But as I said before, my concerns are not misplaced. There is something more than that meets our eyes. We need to find out. What do you think Mr. Murthy? Vinay Murthy:  You are right. There are other areas to be fixed. In my opinion, one of the best ways to know how we are doing is to ask our customers. I have gone through some customer feedbacks in the recent past, and I can tell you that most of them have not been very kind in their comments. In fact some of them are even alarming! Vinay handed over the customer feedbacks copies to all those present for the meeting. Suneet Thomas: Look at the first three comments from our customers. No one seems to be happy with our customer service, especially with our call centre response. [pointing-out to these three comments] Comment 1: "One of the worst services in the whole world, worst ever response from any mobile service providers.my friend who doesn't know Tamil had problems with communicating with the Peptel person. I called the concerned person and asked him about the status of the request. He replied me "I can't tell u all the time, don't call me now and disturb me, If u want to change our service please do". Already Peptel is suffering from Crisis; my free advice for Peptel would please remove these kinds of cheap employees and recruit better talent who would really serve the company. I am not using any harsh or bad words which any one in my situation will do. Let us see what action Peptel takes." Comment 2: "I am tired of this Peptel service, if I want to talk with customer care people, the phone will never connect and balance will be deducted. You will never get clear ideas of the plans & tariffs. I am paying 2p/1sec for local mobile. All the plans are too much costly compared to others. Please, please port your numbers and teach Peptel a lesson." Comment 3: "Facing the problem for last 90 days but not solved yet! Customer care representatives are so dumb and untrained that they are not able to understand my problem and hang-up! I have got the complaint registered more than 8 times and my problem has not yet been solved. MR PEPTEL GUYS YOU CHEAPSTERS AND LOOSERS MY COMPLAINT NO IS GP**3**08130*** " Govind Natarajan, CMO: But our frontline sales people and customer care executives are poorly trained and do not know on many occasions how to deal with customer, especially when the customer is unhappy with our plan or service. Our marketing team is doing its best and that is why we are in number one position. Suneet Thomas: Mr.Natarajan, I have never been unappreciative of the efforts of your team. In fact we strategically focused on sales and marketing and it continues to be our key focus. But I have a feeling you are being offended by the feedback of our customers. [Turning towards the Director - HR] Ms.Guha why is this training-gap with respect to our sales and customer care people? Meeta Guha, Director-HR: With due respect, I have always struggled to get participants for the training programs that my training team had organised. We have had training programs on technical aspect, product & plan aspects, sales training, and customer care training and even on soft skills. But getting participation is the biggest challenge. The sales and marketing managers are not ready to release their team-members to participate in the training program. It is only after several rounds of requesting that we manage to get some participants. What can we do? Govind Natarajan: That is because the training programs designed by your team are far from reality and do not cater to our needs. These training programs are of little use as they are highly theoretical. Practical training is a far cry. In fact we feel that our team-members get better trained by spending time with clients than in your training rooms Meeta Guha: You have never told me this before. In fact, we have always received very positive feedback from the few participants that we have got. Additionally no one from the sales & marketing team has ever cared to spend time with us to define the requirements!  </div><div>break-page-break</div><div> Suneet Thomas: Wait, wait! Let's not engage in mutual punching and finger-pointing. The idea is not fault-finding. Instead it is to collaboratively find out real problem and then work towards the solutions. In fact, your reactions themselves give me an inkling of a problem that may be systemic. Anyways, I will come to that later, please read the next two comments. It seems that we have been successful in annoying and turning-away first time customers. This is equally worrisome. Why is this happening Mr.Natarajan? Please do not get me wrong, when I ask this question particularly to you, but I need answers. Two new customers who came to us with expectations were exasperated and left us. This is bad publicity. Why couldn't we retain them? Comment 4: "It was my biggest mistake to go for the Peptel offer to port my aged old number to Peptel in the expectation of a better service, but to my utmost despair, today my very old number (nearly 9 years old) is disconnected permanently and is wasted now. First of all Peptel dealer offered a plan and when I opted for it and got my number ported, I found that Peptel has activated wrong plan on it having lesser benefits, and when I complained against it, they debarred my outgoing with reason that address could not be verified, However Peptel executive himself verified address and confirmed to me that address has been verified. When I further inquired about it then Peptel verification department girl told me that since I was not satisfied (as promised plan and offer was not given), so they sent negative address verification report. When I escalated the issue to Nodal officer, (YOU ALL WILL BE SHOCKED TO READ), Peptel permanently disconnected my number with same reason of address verification. Now my number is not active with either of operator, this is all because of Peptel and its poor services, Instead of taking action against dealer for making false promises, they are harassing consumers." Comment 5: "When I took a broadband connection from them a year ago there were 3 different people from three different sections of the company running after me to provide me the connection..... After 6 months there were some connectivity issues with their broadband. I complained three times, their technical personnel visited my place thrice but was unable to trace the problem all the three times and he got his job sheet signed by me telling me the problem will be solved within 24 hours and if I don't sign it he will be in trouble. I was exasperated. When I called them for disconnection of my line ironically I was told to visit their outlet to do so because according to them it cannot be done over phone! Why should I do that? They were running after me to take this connection and now that I do not feel satisfied with this connection they want to deflect me for further harassment! So I refused to do so ......since the last 5 months I am using another pre-paid dongle for internet. But the Peptel recovery team is constantly harassing me over phone. Why should I pay them when I am not using there broad band. Sadly, I am a witness of the downfall of my favourite brand and a victim of the same. I had 7 different Peptel connections in my family a few years ago as I am a fan of Mr.Suneet Thomas but now only 4 have survived, others have been replaced by ideas and bodafone. Let's see how long the remaining four survive!" Govind Natarajan:  I think our sales and marketing people lack motivation. We have to relook at their compensation structures. The variable portion needs an rejig. We must reward performance more. MeetaGuha, Director-HR: We have a proposal on similar lines for consideration of the senior management and the board. We were about to table that in our meeting to prepare the strategic plan for the next financial year, to be held next month. Ishaan Kapoor: I do not refute the need to have a relook at the need for having a look at the variable component for the next fiscal. But I have a sneaky feeling that we need to redefine performance as well. Suneet Thomas, CEO: That's a bit of a puzzle Mr.Kapoor. Would you please clarify? Ishaan Kapoor: Right now, the compensation, especially the incentives, have been linked to targets achieved by the sales and marketing team in terms of new connections, more sales, more profits. But we have never linked compensation to customer retention or customer satisfaction scores. Somehow I feel we have led our people to believe that get as many new customers as possible. But what happens, once we get them? Who takes care of them? No one really cares about the latter part as there is no incentive in doing that. So the customers are more or less 'orphaned' once they are 'in'. Suneet Thomas: But aren't our sales and marketing fellows supposed to do that? I mean we have set no different expectations from them. Ishaan Kapoor: Yes they are, but such expectations do not reflect in performance metrics nor do they reflect in the way incentives are doled-out.  I read this comment (Comment 6) on a social networking site and boy, it worries me! [Shares comment 6 with other members attending the meeting]</div><div> Comment 6: "Peptel management people are best blood suckers. Only positive thing they have on their side is having a good network, which just happened because they were the first network providers in many areas, due to which they have a good network. They really don't care about providing customer service to the public. If such service was provided in other developed countries their consumer court would have ordered the management people to be prosecuted." Suneet Thomas: Hmmm! Worries me as well. Pretty strong comment! What do you say Ms.Guha? Do you concur with Mr.Kapoor's remark and observation?  </div><div>break-page-break</div><div> Meeta Guha: I think it is a valid point. We need to work on that. In today's discussion everything seems to be converging on a HR problem. I have no problem with that and I am ready to take the ownership of the same as well. But before we rush to conclude that HR needs to be rejigged and everything else is hunky-dory, we must read this comment by a customer (comment 7). And you won't believe where I found this one— in a website that allows customers to freely share their bad experiences with a product, service or brand. [Shares comment 7 with other members attending the meeting] Comment 7: "My brother has anPeptelpostpaid connection for 5 years. Recently his Simcard was damaged. He called the call centre of Peptel. They told him to visit one of the Peptel offices in Bangalore with an address proof, ID proof and a photo. He did the same. Incidentally for the address proof he took a copy of his SBI passbook. When he reached the Peptel office near Raheja Arcade, Koramangala, he was asked to fill-in another application form, which he did. The form was submitted, and the lady at the post-paid counter was processing the request. Suddenly she said that she required the latest transaction details of the bank account which my brother had given as address proof. My brother asked why it was required. The lady simply threw the application form and said if he did not have it the request cannot be processed. My brother tried to reason, he was shown another person to speak to. This person repeated the same thing. My brother told him that it was incidental that he had brought the bank passbook photocopy as the address proof and this was never told to him by the Call Centre executive. In a busy city like Bangalore, to go back without getting the Sim and to have to come again next evening is almost unthinkable. Besides, my brother told him that they had the bank account number, his pan card copy (as ID proof), and they could simply verify with the bank if they had any doubt. To this the Peptel executive replied, why they should verify. (Then why the hell were they asking for transaction details). After some argument this executive led my brother to another person, who was supposedly the manager in that office. He was busy on phone and simply refused to listen. When my brother tried to reason with him, he said that he is busy on conference call. For a manager the conference call is more important than the customer? The manager was the rudest my brother had ever seen. My brother's contention was very logical: 1.    In first place, address proof and id proof are already verifiable documents. Then why should a mobile service provider ask for further documents. 2.    If further documents were required, why wasn't he told when he called the call center? 3.    Why no one in the Peptel office would could listen properly to the customer and solve his problem? In short Peptel office appeared like hostile camp. After lot of argument the manager softened and surprisingly he now gave the sim card to my brother. My brother was also asked to pay Rs. 25/- as duplicate sim charge, which he did. He asked my brother to submit transaction details of some other bank and send the same by email to him. Once back home, my brother sent him an email with a copy of the transaction details of another bank to the manager of the Peptel office Mr.Ganapati. Although his call service was activated, to his surprise he found that his sms service was barred. Next day he called the Peptel customer care (really?) number 121 to enquire about the same. He called several times and he was told different reasons every time but his sms service was not restored. Some of the reasons that Peptel's customer care told him were: 1.    'Sir, document verification is being done that is why your sms service is barred ' (This is not a new connection. It is a 5 year old connection for God's sake! Why should verification require Peptel to bar the sms service?) 2.    'Sir, due to some technical reasons, the sms service is barred' . (What technical reasons?) 3.    'Sir, this is our process at Peptel, it will take 48 hours' time' (Is process more important or the customer? Process should be to help the customer not to harass a genuine loyal customer. And then what is the process, no one explains!) 4.    'Sir, migration of passwords is going on your sim card and hence it will take time to restore your smsservice' . (This is false. Being a IT engineer, my brother knows that such migrations do not require any service to be held-up) And finally when my brother would give valid counter arguments to each of their excuses, they could simply say - 'Sir, I am from accounts, I cannot do anything' , or, ' Sir, I am helpless, this is the process, I cannot do anything' . If everyone at Peptel is so helpless, then who would help the customer? Peptel does not seem to be 'one-company'. It is broken into dysfunctional silos. Call Centre is one such silo, the Peptel offices in the city is another, the manager is another and perhaps the corporate office is another. In all this the customer is being taken for a ride." Meeta Guha:: I know that we cannot reach any conclusion based on one comment. But I picked this comment because of two reasons - one this looks more analytical and second it talks about something that we need to ponder, I feel. I request you to focus specially on the last paragraph of the comment. 'Peptel does not seem to be 'one-company...' There has to be internal collaboration and integration amongst various functions for the customer to get a unified experience. Collaboration is something we can really explore in our organization - both in terms of quantum and quality of collaboration currently in place. Suneet Thomas: I do want to believe that we have excellent collaboration in our organization between our various functional departments and teams. However, I do see a merit in Ms.Guha's suggestion in exploring the same. If you can recall at the beginning of the meeting, I had said that judging by your reactions, I almost have an inkling of the problem at hand. I feel fault finding is less when collaboration is a norm. Next month, we have a week dedicated to drawing the strategic plan for the next year. We have to fix everything before that. We cannot afford similar run for another year. I request all of you to prepare detailed presentation and report. However, I would particularly request Ms.Guha to draw-up a detailed HR plan and present it next month. Call it a transformation plan or a redesign, but I need the plan to produce results. I on my part assure you of all support and flexibility to change, if required. [meeting ends, members disperse] Suneet Thomas is staring at the framed Vision and Mission statements of the company — 'We will enrich lives by putting the customer at the core of everything we do. We will meet and exceed their expectations based on our understanding of their needs and drives and provide them state-of-the-art, affordable and customer friendly communication services. We will build a truly world class company value for our stakeholders that includes our customers, employees, shareholders and the larger community.' He wondered how much Peptel had been able to live-up to that and how will it be in the future. Dr. Debashish Sengupta is Professor & Chair- Organizational Leadership & Strategy Area at Alliance Business School, Alliance University, Bangalore.</div>