BASIC OPERATORS: More Cash in Coffers

Three developments in the recent past are set to have a profound impact on
the business prospects of basic telecom operators. The first relates to the
TDSAT ruling dismissing the petition by COAI against the government’s decision
to allow fixed line operators to provide limited mobility through WLL. The
second is TRAI’s order hiking the rentals of fixed line phones for commercial
subscribers. And the third is opening up of Internet telephony from April 1,
2002.

"Business plans of most of the basic operators have a significant WLL
component. The ramification of this decision is bound to be huge on the
sector," Rothin Bhattacharya, executive director, KPMG Consulting, says.
Players like Reliance will particularly benefit from the ruling, as they have a
huge thrust on WLL-based technology. Even the Bharti Group, which was one of the
strongest opponents of limited mobility, is looking at the technology seriously
and has set up a core group on CDMA.

Basic operators will now be pitched in direct competition against cellular
operators. At Rs 1.20 per minute for a three-minute outgoing call and free
incoming calls, cellular operators will find tough competition in WLL-based
services. Basic operators have installed CDMA1X, which can be used to transmit
data also. But SC Khanna, secretary general, ABTO, brushes aside fears of impact
on the cellular sector, "The mobility will be limited to the SDCA, so there
is really no competition to cellular operators who provide roaming among other
value-added services."

Bhattacharya is also optimistic that there is room for everyone. "Our
growth projections, which estimate an addition of 40-45 million subscribers in
the next 4-5 years, clearly demonstrates that there is room for all operators in
the wireless space."

The 24 page order by a three-member bench chaired by Justice SC Sen placed
technology above business interests, "There cannot be any legitimate
expectation that no new technology will evolve and if any new technology comes
that will not be allowed to adopt by any competitor."

The second development in which TRAI hiked the rentals for commercial users
of basic telephony between 22 to 33 percent depending on the capacity of the
local exchange, is another breather to the sector. The regulator has slashed the
number of free calls for urban commercial subscribers to 30 calls from 60 calls
per month, and 45 calls from 75 calls for rural commercial subscribers from 1
April 2002.

"Although the interim benefits are low, at least a separate commercial
category has been created. World over, commercial tariffs are different from
residential tariffs just on the lines of electricity tariffs," Khanna
points out.

The biggest beneficiaries from the increase in rental of commercial customers
will be MTNL and BSNL, both of which will earn additional annual revenues of Rs
250 crore and Rs 550 respectively. Private operators also stand to benefit,
since their operations are largely focused on the corporate sector.

The third development allowing Internet telephony from 1 April has evoked
mixed feelings. On one hand, basic players have been fighting for removing
regulation in adopting new technology–as in the case of allowing WLL-based
limited mobility –and on the other hand, they are uncomfortable at the
prospect of ISPs providing Internet telephony.

T Narasimhan, president, corporate affairs, Shyam Telecom, says, "There
is bound to be an impact from any march of technology. We welcome the decision
but all we are asking for is that tariffs be cost-based."

Operators are sure that DLD operators will not be affected by Internet
telephony. The low PC penetration and the fact that PC-to-phone within the
country is still not allowed, will really not affect the revenue streams of
domestic operators.

Balaka Baruah Aggarwal

New Delhi