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To: Johnny Canuck who wrote (16649)	6/19/1998 4:48:00 AM
From: Johnny Canuck	Respond to of 69159

India's Cellular Phone Industry Struggles (06/16/98; 10:00 a.m. ET) By U.L. Pay, TechWeb The struggling Asian economy and the introduction of new taxation rules have dramatically slowed down India's cellular phone market, once one of the world's most lucrative cell phone markets. When cell phone services were launched in India more than two years ago, most cell phone operators were keen to sign up large numbers of subscribers with the hope that high revenues would automatically follow. But the Cellular Operators' Association of India (COAI) said it now estimates the Indian cell phone industry is losing $102.56 million a month. Indian operators were initially successful in attracting subscribers; at the end of December 1997, there were close to 800,000 cell phone users in the country. But a number of factors have slowed down the market. These include the fact that initial subscriber base growth fell below many operators' expectations, air-time usage was nowhere near expectations, and banks have been unwilling to fund operators that didn't expect to make a profit quickly. Recently, the market has been further hit by a dramatic slowdown in growth of cell phone subscribers, resulting in numbers well below projected targets. Telecommuniations industry observers attribute the drop in growth of cell subscribers -- 60 percent in the past three months -- to India's industrial slowdown and a new tax being levied on cell phone subscribers in India. Foreign operators misunderstood the Indian market when they entered it, said one investment banker. "For global telecom operators, India ˜˜!sI'˜˜ Sunil Gulati, head of corporate finance at BankAm, an investment bank in India. But while enthused by a recently liberalized economy and the lack of experience in the Indian market, telecom operators overestimated the market potential and the pace at which this would be realized, he said. In 1992, when the Indian government invited bids for cell phone licenses, both the government and industry estimated each subscriber would, on average, use a minimum air time of 250 minutes per month. "The projections are a joke now," said T V Ramachandran, chief of the COAI. India's tax department has been partly blamed for the cell phone slowdown after it demanded tax from cell phone users in an attempt to increase the number of tax payers in India. "We appreciate the government efforts to widen the tax base, but cell phone ownership is being isolated as a means to target potential taxpayers," said K Vijay Rao, executive director and CEO of Indian cell operator Escotel Mobile Communications. Cell operators are now waiting for an Indian government-commissioned report by the Bureau of Industrial Costs and Prices, which has reportedly detected a huge shortfall in the projected revenues of cell phone operators. The report is expected to be published by the end of this month. The telecom industry requires shareholders with deep pockets, said Ravi Suri, head of structured finance at India's ABN Amro Bank. "Thus, changes in ownership structures are more than welcome as existing players will get replaced by players with deeper pockets and long-term interest in the industry," he said.