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BY JM
Tring tring! Don't ignore, that
call is yours. Wake up, pick up the cell, the tariffs
have crashed again. If you thought cellphone rates were
not going to go down any further, hop on, there is there
is way to go. Take the call!
The latest episode in the Indian
mobile rate war started when Reliance Infocomm pulled
the trigger a few weeks back with a massive 60% cut in
tariffs for prepaid Reliance IndiaMobile (RIM) cell
users across its network. Reliance prepaid call costs
came down to 99 paise as against Rs 2.49 before. The
Reliance move rattled the entire cell spectrum.
The first one to take on the
Reliance juggernaut was Bharti Televentures (which owns
AirTel and AirTel Magic)), which unleashed its own
reduced tariffs. The GSM major kicked up dust, and
others followed suit. Airtel announced AirtelOne 150
plan, where a call to any GSM cellular network is
charged at Rs 2 per minute under post-paid category.
Under the pre-paid category of AirtelOne 150 plan, a
call to any cell or WLL or fixed line is charged at Rs
2.25 per minute.
Reliance had announced a tariff
of Rs 1.79-per-minute for a call to any cell under the
pre-paid category and Re 1 per minute to any cell under
the post-paid category.
 The
next one to jump into the fray was the state-owned
telecom behemoth Bharat Sanchar Nigam Ltd (BSNL), which
operates CellOne cellular services across the country
except in Delhi and Mumbai, apart from land lines and a
host of other value-added services. The new BSNL rates
undercut Reliance and the discounts were for cell and
land phone users as well. Aggression personified, the
PSU giant went straight for the jugular, with a
reduction in domestic long distance rates as well. Hutch
(which operates Orange and Hutch brands) and BPL Mobile
followed suit and before one knew it, the rates had
crashed to levels unheard of even in the global
telephony market.
The next to don battle paint
was MTNL, another PSU blue-chip and BSNL's city cousin.
MTNL operates telecom networks in Delhi and Mumbai under
its brand Dolphin and prepaid brand Trump. MTNL slashed
cell-to-cell rates by about 37% in the postpaid segment
and about 28% in the prepaid segment. It also slashed
STD rates for both cellular and landline services by up
to 50% in the over 500 km slab to Rs 2.40 a minute.
Also, for local calls to mobile networks, the pulse
duration was revised from 60 to 90 seconds, effectively
halving the tariff. In Delhi and Mumbai, we are the
cheapest, preened MTNL chairman and managing director
RSP Sinha.
Continuing the tariff war, Tata
Indicom followed by cutting its prices by 33 per cent
for calls in both intra and inter-circle calls. The
company has reduced intra-circle call rates to Rs 1.20
with a 60-second pulse rate, compared to the earlier
rate of Rs 1.80. The new rates are applicable for Tata
Indicom fixed wireless, wireline and public telephone
booth tariffs. Tata Indicom is the telecom umbrella
brand of Tata group companies, which provides CDMA based
wireless services apart from broadband services. The
call rates for inter-circle calls have been slashed to
Rs 2.40 per minute to any number above 50 km from the
prevailing Rs 3.60. At the time of uploading this
article, almost all Indian cellular and landline
operators have undertaken massive rate cuts.
It's literally talk time for us
consumers, but is the cut-throat rate war good or bad?
Memories of 1997 come to mind, when Reliance Infcomm was
yet to be born, when the Mumbai cellular market was
dominated by only two players who had comfortably carved
out the market between themselves. Users from those days
recollect how the rate changes of both Hutch and BPL
were almost identical so that customers had little to
choose from. If you are unsatisfied with BPL, you go to
Hutch which offered identical tariffs. The cellular
market was an oligarchy.
The scene changed with the
grand entry of MTNL and AirTel. MTNL sported cheaper
cell tariffs, but trailed others in terms of customer
service and coverage. Besides, other cell operators in
the country ostracised MTNL for not being with the
Cellular Operators Association of India (COAI). Those
days were the days when the GSM-CDMA battle was picking
up momentum. MTNL tried to ride both the horses with
Garuda CDMA in one hand and Dolphin in the other.
Consequently, when other GSM operators sewed up roaming
tie-ups with other operators, the Dolphin user could
swim only in Delhi and Mumbai pools.
Even as the GSM-CDMA battle
unfolded in the background, it was happening days in the
cellular services industry. As more and more operators
came in, the oligarchies collapsed and the rates started
declining. Mobile phone usage was no longer and
expensive affair. With the installation of the Calling
Party Pays (CPP) system, the last hurdle to mobile
expansion disappeared. Now, telecom operators realised
the potential size of the market and dived in.
The battle was taken to the
next level with the birth of Reliance Infocomm, which
undercut all existing players with rates unheard so far.
The company's aggressive sales and marketing made it one
of the country's biggest wireless operators almost
overnight. Cellular operators cried foul, saying
Reliance was using licence for land telephony to provide
wireless services. The battle went to the Telecom
Regulatory Authority of India, the Telecom Dispute
Settlement Appellate Tribunal and finally, the Supreme
Court, where Reliance won the battle. Forking out a
licence fee of Rs 10,000 crore, Reliance migrated to the
newly-installed Unified Licence regime.
All through the battle,
cellphone tariffs declined steadily. The deep cuts
started bleeding the small fry. It was time for
consolidation in the cellular space. The Birla-Tata-AT&T
consortium, which was a loose entity, coalesced into
Idea Cellular. Escotel, which had limited operations in
Kerala and Punjab joined the Idea embrace and merged
into it. BPL bought out AT&T's stake in its JV BPL
Cellular. Skycell in Tamil Nadu was taken over by Bharti
and renamed AirTel. AirCel, a Sivasankaran-promoted cell
operator in Tamil Nadu, in December 2003 bought RPG
Cellular. Later in June 2004, AirCel was in turned
acquired by Hutch in one of biggest acquisitions in
Indian telecom history estimated at Rs 1,600 crore. In
another deal, Singapore Technologies Telemedia Pte and
Telekom Malaysia Bhd jointly bought a one-third stake in
Idea.
Analysts say cell tariff cuts
are necessary as operators roll out networks in new
markets. Meanwhile, the smaller players, even the
efficient ones, get pushed outside, since they can't
match the scale and synergies of the big boys on the
scene. In the short to medium term, expect more price
cuts. The Dhirubhai Ambani Plan (remember STD at 40
paisa/minute?) and other marketing pushes are believed
to have brought Reliance Infocomm to dire financial
straits, but the company sure has lots of sleeves up its
sleeve. Expect BSNL to match, if not better, Reliance
rates at every stage. If push comes to shove, BSNL &
MTNL can unleash a no-profit blitzkrieg and drive
Reliance and others out of the market. Profit is not
their primary concern. Once the BSNL-MTNL merger becomes
a reality -- which seems quite real now -- the
nationwide scale and synergies will enable the combined
entity to take a quantum leap. Expect fewer, smarter,
mobile players in the future offering schemes that more
people can make sense of.
Quaint are the ways of the
market, isn't it? From the oligarchy of early cellular
days, competition threw up a dozen operators, many of
which are now merging into the bigger players. Telecom
experts believe that the number of cell players in India
will come down to a lean mean set of about 4-5 from
about a dozen now. But don't fear a 1997 rewind.
Competition has come home to stay. And it's not going to
go -- the rentals have crashed, you see!
BY JM
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The
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The
war of India's mobile operators