BACK IN THE RING (India)
Business Line
December 18, 2002
From being slow and stodgy, the one forced to do the rural beat, basic telephony is suddenly emerging as the space where all the action is going to be. And pushed to defensive watchfulness, for a change, is the cellular service. Looks like the country cousin is set to wrest all the glamour, for now.
UNTIL recently it was the GSM cellular service sector that was the glamour boy of the telecom industry in the country. If it so much as sneezed, everybody would know. The fixed line, or the basic telephony sector, was the slow and stodgy, poor cousin, full of complaints, the one which was forced to go into villages. There was not the private investment on the scale of the GSM sector, and only four or five basic telephony circles in the country were active at all.
But the imminent entry of Reliance Infocomm, which is rumoured to be readying a whole bouquet of telephony-related services at very attractive tariffs, has now changed all that. Its basic telephony kin in the private sector have been galvanised and frightened into consolidation and action. Suddenly it is basic telephony that everyone is talking about and it is basic telephony that is making a lot of news. The cellular industry, which grew at close to 80 per cent over the last year, is poised to reach the 10-million subscriber mark by the end of the current calendar year. This is a remarkable figure, considering it is nearly one-fourth the total installed capacity of more than 42.5 million fixed land lines of the state-owned BSNL which has been in existence for decades and 5.6 million MTNL lines in Mumbai and Delhi.
On the private sector front, Bharti has over 2.5 lakh lines, Tata Teleservices and Hughes Tele.com (now a subsidiary of Tata Teleservices) 2 lakh each, HFCL and Shyam Telelinks more than 80,000 and 30,000, respectively. Together, they have less than one million lines in the country, not one-tenth of the cellular subscriber base.
Yet it is the basic telephony operators who look the most ambitious today; basic telephony is where, apparently, most of the action is or being talked about, even if it is yet to happen. And it is the cellular operators now who have shrunk back in defensive watchfulness, wondering what will happen of them should the fixed telephony providers introduce wireless in local loop (WLL) limited mobility using the CDMA technology.
Although there is a case in the Supreme Court (ruling awaited at the time of going to press), as to whether basic telephony operators can go ahead and offer limited mobility services, and if so, whether they can be confined to a particular technology which will ensure they offer limited services and not become full-fledged mobile telephone operators, every one of the basic operators is charging ahead with its plans, making conveniences for advanced technologies in CDMA (that could technically offer full-fledged roaming, though by regulation these operators cannot) should they be allowed to do so. Limited mobility also offers services at the same tariff as fixed lines. This is the cause of much distress to the cellular operators who fear being edged out of the mobility-arena.
On the other hand, limited mobility providers do have the question of 'return on investment' to worry about if their tariffs are so low; considering they have complained from time to time that their existing fixed-line tariff itself is not cost-based! But now, Reliance's reportedly rock-bottom package rates that are being talked about have taken the wind out of their sails, so they do not know which direction they face - whether a huge volumes market that will bring in sufficient revenues; or whether it will be such a losing low-rate battle that everyone is dragged under. "However, for now, nobody is worried about tariffs, everyone is thinking of large subscriber bases because the feared leader Reliance is thinking of that and leading them that way," says a telecom industry analyst.
Synergy is the key
The private basic operators whose subscriber base was only creeping (together they accounted for well less than a million lines) and who were worried about low tariffs, are now talking about synergies of basic telephony, national long distance, Internet, broadband and other services; at least, the larger groups are aligning themselves quickly to be able to provide their customers a basket of services.
While Reliance Infocomm is said to be planning a "burst-into-the-market" launch, starting services simultaneously in 17 circles or so with a whole span of services for a lump sum, the details of which are carefully kept under wraps, it is already known that BSNL, with its large spread and deep pockets, will be present across every sector of the telecom service industry.
Now the larger groups are fast aligning themselves. "We are left with no other strategy," says a senior executive with one of them.
Tata Teleservices recently bought more than 70 per cent stake in Hughes Tele.com which has the lucrative market of Maharashtra and which has already made inroads into the corporate sector in Mumbai, Pune and other important cities. Together, they make for the largest private basic operator, each boasting nearly 2 lakh customers, with TTSL having nearly 80,000 limited mobility customers included. TTSL has other prime circles such as Andhra Pradesh, Tamil Nadu, Delhi, Gujarat and Karnataka.
Needless to say, it already has CDMA services running in most of these circles and plans to launch soon in Maharashtra as well.
TTSL has already invested Rs 1,400 crore and now will invest another Rs 500 crore in the next two years; TTSL is working out synergies with the new Tata acquisition VSNL (an International Long Distance provider as well as other value-added Internet services provider), and says its investment plans for the next seven years amount to Rs 7,500 crore, including its equity investment in Hughes Tele.com, to be soon renamed Tata Teleservices (Maharashtra) Ltd.
The most telling sign of the perceived potential (or threat) that consolidated basic services combined with limited mobility services holds, is the way Bharti Televentures has changed tack in preparation for a posssible battle for survival between GSM and limited mobility services.
Even as early as six months ago, the Bharti group was saying its emphasis was on cellular services and that limited mobility was not quite so attractive when there was unlimited mobility being made available by it!
But recently, Bharti Televentures announced the merger of its fixed line, long distance and broadband and V-Sat companies into a single entity called Bharti Infotel. Not only that, Bharti, the biggest operator on the GSM cellular services front, has applied to the Government for spectrum allocation for CDMA services. Bharti already has more than 2.5 lakh fixed line customers.
Thus many of those (such as the Bharti and Tata groups) who could strongly take up the case for GSM operators now have a foot in the limited mobility arena as well, leaving the Hutchinson and BPL groups the only private operators with large footprints who have a pure presence in GSM. Of these, BPL is seeking to merge its cellular operations with the Tata-Birla-led group Idea! Cellular; and the Tata group has a foot each in both arenas. WLL operators do not pay separate licence fees from that for their fixed telephony ones for mobility. In addition, they are not charged airtime rates when their calls terminate on cellular lines. Whereas cellular operators pay fixed lines Rs 1.20 per minute for termination of their calls.
Cellular operators complain that apart from limited mobility services not paying them airtime charges for termination, the spectrum allotted to them is very inadequate, while CDMA technology itself makes it more capable of efficient use of spectrum.
The state-owned BSNL plans WLL operations in 58 cities in the country by end of year 2003. As at mid of this year, BSNL has more than 60,000 CDMA lines, MTNL around 50,000, Tata Teleservices 80,000 in Andhra Pradesh, and HFCL in Punjab and and Shyam Telelink in Rajasthan a few thousands each. The new rental floor of Rs 200 and tariff at Rs 1.2 per three minutes (average) is also making limited mobility very attractive to customers, whereas the average rental for cellular services is Rs 202 per month with airtime charge of Rs 1.99 per minute, with add-on of Rs 1.20 when connection to a fixed line is made. And, although the Telecom Regulatory Authority of India is discouraging cross-subsidisation of services, operators do get great advantage from just synergy of services.
The Cellular Operators Association of India has noted that the cellular industry would have around Rs 25,000 crore invested in the country by March 2003. No consolidated figure is available for basic services, with some of the largest operators keeping plans under wraps, but the investment, given the current stir happening, would certainly be very large, say analysts.
But private cellular services also reported cumulative losses of Rs 7,700 crore at the end of the last financial year. And this is despite cellular revenues growing from Rs 3,285 crore in 2000-2001 to Rs 4,700 crore a year later! "It is anybody's guess how much the fixed operators will have to struggle," say analysts.
Kripa Raman, kripram@thehindu.co.in |
