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Cellular phone war hots up again

Salil Panchal/Morpheus Inc in Mumbai

The war has erupted again. And this time it is closer to our ears. More than a month has passed since leading telecom conglomerate Bharti Tele-ventures launched the AirTel brand and the largest regional roaming network in Asia.

Despite introducing attractive features and revising tariffs in the Delhi circle, its rivals in the field - BPL Mobile and Orange - reacted with just a small wriggle. No major change in policies or panic statements were made.

If anything, it has got the other regional player MTNL in a fix. Mahanagar Telephone Nigam will now have to take a more aggressive stand to safeguard its position in the Mumbai circle and also attempt to strengthen its position in Delhi.

And how much will the fourth operator scenario now impact the cellular market in the western region? Will Bharti Tele-ventures strengths - strong marketing, huge nationwide reach and financial stability - edge out rivals in the western belt in the coming months? And within the scenario of attractive packages, what will actually benefit the customer?

Bharti braces western shoreline, cuts tariffs in Delhi circle

The telecom conglomerate through the AirTel brand launched its services in Mumbai, regions of Maharashtra and Gujarat over the past few weeks. AirTel launched the largest regional roaming network in Asia for pre-paid customers. Its network will be operating on 1800 Mhz with over 300 cell sites.

The main attraction is free roaming charges on calls placed through its AirTel mobile network anywhere in the country. It also focussed on a 30-second billing rate, free incoming calls between intra-operator (AirTel to AirTel) consumers and free airtime for one international, national and local number, without any monthly charges.

In a related move, Bharti on August 13 announced two
new tariff plans and offered free incoming calls in the national capital as part of the various measures.

Bharti said subscribers in the capital would not have to pay for incoming intra-operator calls. One of the new tariff plans allows customers to make free incoming and outgoing calls for a fixed monthly rate of Rs 2,195. Under the second plan, subscribers who pay a total monthly bill of Rs 1,495 will get incoming calls free of charge and pay an outgoing rate of 0.50 paise for a 30-second call.

BPL, Orange counter Bharti's roaming plan

Hutchison Essar, a unit of Hong Kong's Hutchison Whampoa Ltd, has already cut rates in Delhi and introduced a package similar to Bharti's in Delhi.

Further, to counter Bharti's growing presence, six operators came together to form "friendly networks" - to offer cheapest roaming tariffs in the country at Rs.1.49 per minute for voice calls and Rs 1.49 per SMS (this has been lowered further).

Till now the TRAI dictated charges were Rs 3 per minute for all roaming calls and Rs 3 per roaming SMS. The networks include Hutchison Max, BPL Mobile, IDEA Cellular, Oasis, RPG and Spice.

Both the Mumbai operators BPL and Orange also announced incoming calls free for Mumbai subscribers from their respective networks across the country.

A closer look

Bharti Cellular has pushed the pulse rate down for the post-paid and the pre-paid services. The pulse rate has been reduced on an overall basis to 30 seconds from the existing 60 seconds. This means that the post-paid subscriber who uses less than 250 minutes of usage time per month will pay Rs 0.90 for a 30-second call, while a pre-paid subscriber who uses between 250 and 500 minutes will pay Rs 0.75.

The package pushes the post-paid customer to use less airtime and speak less. And it is not as if the tariff rates have been pulled down in a major way. The pre-paid segment customer certainly stand to gain somewhat, but in the post-paid segment, there is not much to write home about.

When the Dolphin service was launched in the metros of Mumbai and Delhi, the tariffs fell from an average Rs 2.40 paise/30 sec to the Rs 1.80 paise levels. This would mean that the rates fell by 28-30 per cent when MTNL came in and between 17-20 per cent when Bharti came in. It will be interesting to see how the subscribers react in the coming weeks - with MTNL proposing to cut tariff rates further.

Following Airtel's entry into Mumbai, BPL Mobile and Orange slashed rates marginally. The BPL postpaid subscribers can now choose a 60 second pulse at a rate of Rs 1.49 per minute, for up to 250 minutes or he can choose a 30 second pulse at Rs 0.90 per pulse. Orange has cut tariff by 20 per cent for its postpaid subscribers with no monthly commitment, a choice of 30 and 60-second pulse rates, and free usage on pre designated local, STD and ISD numbers. Customers may not see too much difference now in the postpaid segment.

In another 'new' feature, AirTel provided free airtime on three outgoing numbers - one local, one national and one international call. But customers are concerned over hidden costs. One should however realise that free airtime does not mean a free call. BPL Mobile's revised tariff plans also includes the free airtime feature.

A BPL Mobile insider, on condition of anonymity, said: "The developments have suited us. There has been little concern for us at this moment. One should look back at the scenario when MTNL was making its entry into this region and see how tariff rates and customer swings were taking place.''

The fourth operators

The Indian cellular market has for the last few years, been the most dynamic segment of the Indian Telecom Industry and amongst the fastest growing. The cellular subscriber base has recorded an impressive growth rate from 0.34 million on March 31, 1997 to 7.69 million on July 30, 2002.

The growth has been driven by offer of services in newer markets, a sharp decline in airtime tariffs and mobile handset prices and increasing competition.

At the same time, aggressive marketing tactics - with a focus on prepaid cards and new distribution channels - has pushed up growth.

The average airtime tariff in year 2001-02 was at Rs.1.8 per minute against the peak ceiling tariff of Rs.16.80 per minute when the NTP (National Telecom Policy) 1999 was announced. With the entry of the fourth cellular operators the tariffs are again set to move lower.

…but what are the benefits to the consumer?

The growth story for the Indian cellular industry is fine, but similar to most S-E Asian and some European countries. In this battle of supremacy, as margins, tariffs and related duties will get squeezed further, what does the entry of new operators bring. And how has the scenario changed over the past few months?

There will be two clear segments where new customers will actually witness a change - the prepaid card segment and the policies linked to incoming mobile call charges (Calling party pays).

Prepaid segment

This is the one area where Bharti Cellular has actually made a major difference. The AirTel-Dream plan is such where the airtime rate keeps reducing with increasing usage, the customer pays as low as 50 paise for airtime of 750 minutes with no commitment value.

Focussing on the prepaid segment has become a crucial strategy for most cellular operators entering new circles. According to industry experts, the prepaid segment is a crucial growth area as they provide upto 55 per cent to the operators' revenue.

BPL and Orange have introduced similar changes. For its pre-paid customers, BPL has only one tariff plan which will include a 30 second pulse rate at Rs 0.90 per pulse.

Moving to the regime of free incoming calls

Some of the leading cellular operators have already announced free incoming for mobile-to-mobile calls in some states and will be rolled out in all networks soon. The operators have informed the Telecom Regulatory Authority of India of these developments. The calling party pays, is a regime, which has been accepted and practiced across most other global cellular markets.

The TRAI has been working in this area since May 2000, when it floated a consultation paper.

This move has over the years been opposed strongly by basic (fixed) telephony providers, particularly Videsh Sanchar Nigam and MTNL.

If and when complete CPP (calling party pays) is implemented, basic telephony companies would have to pay a termination charge to mobile telephony companies. To recover this cost, the basic companies would have to hike the charge for their subscribers calling a mobile number.

Bharti Tele-ventures and Orange have already announced important features. All their subscribers across India would have free incoming calls. The additional cost, which could be added to rentals, will be ''only a partial recovery'' by mobile operators to pay call-terminating charges.

The revenue-share formula among operators will cover mobile wireless in local loop (WLL-M) services as well. In the WLL segment, the free incoming call provision has come in by default.

With the coming of the fourth operators, it is apparent that India is moving towards the regime of free incoming calls. Industry experts are however not clear whether the move towards CPP is due to the WLL pressure or simply internal competition.

New cellular operators will try to lure as many customers as possible before basic phone companies like Tata and Reliance launch WLL-M services, which have free incoming calls and charge Re 1.20 for a three-minute call.

Nation-wide, average mobile tariff is Rs 1.5-2 per minute for airtime and Rs 295 as rental. The TRAI ceiling is much higher at Rs 4.65/minute for airtime and Rs 422 for rental.

Part II: The cellular arena: How do the gladiators stand

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