January 19, 2020
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Distress Signals

High airtime charges impede the cellular revolution in India

Distress Signals

Despite all the hype and hoopla, the mobile telephone revolution in India has got off to a grindingly slow start. In the four metros, where cellular services were launched with great fanfare, demand is sluggish. Calcutta has only around 1,000 subscribers; Madras a pitiful 200-odd. Total for the four metros: barely 10,000.

The culprits: the cost of a handset, between Rs 20,000 and Rs 50,000, as well as high airtime charges, Rs 2.80 per 10 seconds at peak time, Rs 1.40 during standard hours and 70 paise for non-peak hours (incoming calls are also charged at the same rate). For long-distance calls, mobile phone users have to shell out standard MTNL/VSNL charges too. “The prices may not fall in the immediate future,” admits Niren Hiro, marketing manager of BPL, which has launched its service in Bombay. “But it will come down eventually. The trend here will follow worldwide trends.”

Strangely enough, operators would rather wait for the Government to dole out duty concessions to bail them out of low demand trap, rather than voluntarily cut their own charges to spark the market for mobile telephony. But the hope that the Government will slash duties – currently above 80 per cent – on imported handsets may remain mere wishful thinking. The principal reason for low bookings is high airtime charges, not the handset price. And most operators are continuing to charge the ceiling rate stipulated by the Department of Telecommunications (DoT).

“The airtime charges compare favourably with international rates,” maintains Shashi Kalathil, General Manager, marketing & sales at RPG Cellular Services Ltd, one of the two players in Madras. “We forsee no major reduction in airtime charges in the short term,” agrees Mark Rodrigues, chief general manager (marketing) of the Calcutta-based Modi Telstra. But he admits that the scenario could change in the next couple of years.

Bharti Cellular, which has launched its AirTel service in Delhi, is offering a reduction of 5 and 15 per cent on airtime charges for users, and has also reduced incoming call charges by 60 to 70 per cent. There's also a discount on bill exceeding Rs 2,100. Other players now have to follow suit.

But such marginal reductions may simply not be enough. Bharti Cellular boasted of 12,000 bookings; yet, as of last week, only 3,250 subscribers had actually paid up and were hooked on to their network. Meanwhile, there are also technical glitches to be sorted out. The DoT has sanctioned a radio spectrum (bandwidth) of only 4.5 MHz, against the international norm of 7 to 12 MHz for mobile telephony. As a result, Indian cellular players are building more cellsites – base transceivers, which has raised costs. In cities which have frequent power cuts, the need for standby generators has resulted in further rate hikes.

So, cellular marketers are falling back on marketing gimmicks. In Bombay, Hutchison Max has Sunil Gavaskar, and respective brands' causes. Bachchan is even accepting a complimentary cellphone call from BPL subscribers. But is the aspirational appeal enough? Presently small-time businessmen and traders form the majority of subscribers. Large corporates are still wanting and watching.

Meanwhile, operators still reveal in hyperbolic market projections. Predicts N Arjun, senior vice-president, Bharti Cellular: “By March 1996, Delhi will have 50,000 cellular subscribers which would jump to 2 lakh by the end of the year, touching a whopping 7.5 lakh by the turn of the century.” Rodrigues expects the Calcutta market for cellular services to grow to 30,000 subscribers within a year and up to three lakh by 2000 AD. Equally upbeat is Kalathil, who foresees 20,000 to 30,000 subscribers in Madras in next 12 months. India's cellular companies clearly aren't hanging up yet.

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