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Technology Stocks : Qualcomm Moderated Thread - please read rules before posting -- Ignore unavailable to you. Want to Upgrade?

To: slacker711 who wrote (25731)	8/19/2002 1:58:30 AM
From: slacker711	Respond to of 197225

W(i)LL this battle ring in results? By Varadharajan Sridhar Monday August 19, 12:00 AM in.biz.yahoo.com ON July 4, TRAI in the 22nd amendment to its telecommunications tariff order, revised the monthly rental for Wireless Local Loop based Limited Mobility — WLL(M) service — from a floor rental of Rs 450, down to a fixed rental of Rs 200. Done after consultations with the Basic Telecom Operators (BTOs), this is a real bonanza for consumers. This, no doubt, comes as a shock to the Cellular Mobile Service Providers (CMSPs), who have been fighting since last year against TRAI's decision to allow BTOs to offer limited mobility. What does this battle between CMSPs and WLL(M) operators hold for the future? The lower rentals fixed by TRAI and the continued drop in CDMA-based WLL(M) handsets have already started attracting many subscribers. Though WLL(M) operators have been allowed to provide their service only within the Short Distance Calling Areas (SDCAs), it is a cheaper substitute for those who make calls within SDCAs. The call charges are equal to landline charges of Rs 1.20 for three minutes and are, thus, much cheaper than an average cellular call charge of Rs 2 a minute. A single SDCA covers a relatively large area; in most cases, it can cover an entire city. Since more than half the calls made from mobile phones are within SDCAs, there is enough incentive for subscribers to prefer WLL(M). Most CMSPs have reacted to this by reducing rentals and usage charges. The entry of the third and fourth CMSPs in certain circles and metros has intensified the competition and has initiated a price war. Some CMSPs have even started providing free mobile-to-mobile phone calls, reduced the entry barrier for post-paid subscription, providing an array of pre-paid services to increase the subscriber base. But it is not certain if these price reductions are sustainable. The Average Revenue Per User (ARPU) has been declining steadily and is about 15 per cent lower, in metros and circles, compared to 1998 figures. The large revenue CMSPs have to share with BTOs for the mobile-landline interconnection puts the CMSPs at a considerable disadvantage, compared to their WLL(M) counterparts. While the latter do not have to share revenue for WLL(M) phone-landline calls within their circles, CMSPs have to share Rs 1.14 per metered call for every local call made from mobile to landline/WLL(M) phone connected to BTOs network as per TRAI's Interconnection Regulation 2001. This could be almost as high as 50 per cent of the local call revenue. This is a substantial revenue drain for CMSPs as about 40 per cent of the calls from mobile users end up in landline phones. Apart from the above reasons, the high license fees of up to 12 per cent of the revenue in metros and category-A circles, have caused considerable financial drain for CMSPs. Most CMSPs incur 40 per cent of the operating expenses towards interconnection charges and about 20 per cent towards license fees. It is true that competition between WLL(M) operators and CMSPs have brought the much needed variety in service offerings and low-price solutions for the consumers. However, a level-playing field has to be established for healthy competition. Parity in revenue-sharing should be brought for local calls as was done for STD calls, as there is no technical difference between providing service within SDCAs by the CMSPs and WLL(M) operators. TRAI needs to address this issue in the consultation sessions. CMSPs on their part, have to become efficient as selling, administrative and employee costs take up roughly 40 per cent of their operating costs. Except for a couple of operators, most CMSPs have not attained financial closures on their projects. They have to provide innovative service offerings and improve quality of service in the face of stiff competition. India's cellular industry has grown from nothing to more than seven million in about seven years. It will be really sad to see the demise of a promising industry! (The author is Associate Professor, Information Technology and Systems Group, IIM-Lucknow.)