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Coming back from a black year, cellular services was once
again seen as the happening market towards the end of fiscal 1999-00. It not
only showed character by growing quite well, it also stood at the crossroads of
advancing into the exciting world of mobile data. Value-added services were
finally about to mature, thus giving the cellular operators enough reasons to be
hopeful about the future.
Revenue-wise, the cellular market in India grew by 80 percent
to chart a new record-high turnover of Rs 2,252 crore as per our estimate.
Handset sales, excluding the gray and seconds markets, contributed roughly 15
percent with revenues of Rs 336 crore. Rest of the turnover came from services’
revenues, which comprised the consolidated airtime tariff, activation charges,
and value-added services tariff levied by the cellular operators.
The national cellular subscriber base grew by about 58
percent to be at 1,884,311 during fiscal end. Last year, more than 6.5 lakh
cellular subscribers were added to the network. The growth during last year was
a typical hockey stick growth second quarter onwards, with the growth line
running consistently diagonal during the second and third quarters and finally
making a nice curve towards the skies at the end of the fiscal. The equilibrium
in the first quarter was disturbed due to the cancellation of the licences of
three operators in six circles, thus putting their services suspended June
onwards.
Growth Determinants in 1999-00
Fiscal 1999-00 was no smooth year by any parameter for the
cellular operators. Many factors were responsible for the revival of the market.
-
The pressure building on the government to bail them out
from bankruptcy accruing from licence fee liabilities finally popped up.
After several rounds of discussion and debates on all sides (it also became
a part of electoral issues for the Congress and CPIM), it was finally
decided to move to the revenue-sharing regime provided the operators paid up
20 percent of their fee dues. All the cellular operators paid their amount,
save for three–Aircel Digilink in Haryana and Rajasthan, Koshika Telecom
in Bihar, UP (W), Bihar, and Orissa, and Evergrowth Telecom in Punjab. The
Government took immediate action and suspended their operation from the
month of June onwards. -
TRAI’s tariff order had a telling effect on the
cellular industry last year. Before this announcement, cellular operators
levied astronomical airtime rates on subscribers, at least in the metros.
Talk-time was unnecessarily divided into peak hour, standard hour, and
off-peak hour. In the metros, during peak hour airtime rates was as high as
Rs 16 per minute. The concept of shorter pulse periods was not even talked
of. Paradoxically, on the other hand you had the circle operators levying
much cheaper airtime tariffs–symbolizing the inconsistency in tariff. Some
of them even had airtime rates cheaper than the fixed phone rates. TRAI’s
tariff order brought the badly needed standardization of airtime tariff.
Billing slots were reduced into two: standard hours and concessional hours.
Rental charge, which carried a cap at Rs 156, was hiked to a cap of Rs 600
per month. Operators had to provide a standard tariff package in which the
maximum airtime rate of Rs 6 per minute could be charged. -
TRAI’s order on Calling Party Pays (CPP) regime was
contested by MTNL and DoT. It was hence deferred several times during the
whole fiscal. Most experts and analysts consider this as a lost opportunity,
which could have multiplied the cellular subscription manifolds. -
MTNL’s foray into cellular services was another hotly
debated issue. Its opponents argued that it would disturb the level playing
field. Supporters justified the move saying it would bring down the cost of
mobile telephony. -
Will MTNL’s entry into the field really make mobile
telephony affordable? This is a question that the current year will
hopefully answer. Indications are that it will, considering the way the
economics of establishing a cellular network has changed in the last few
years.
Cellular Operators Stand?
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Cellular Operators Stand?
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The Market
Overall, the cellular market in India is still in its
infancy. Adding one lakh subscribers per month does not do justice to India’s
potential. Forget the interiors and remote parts, cellular has not really marked
its presence in medium-sized cities and large towns. Even in metros, cellular
penetration is far from satisfactory. While in Delhi it is a little above 3 per
hundred people, in Mumbai it is well below 3. In China, the personal
communication services (mobile phone services) is growing at a rate of 2 million
per month, while India seems to be happy adding less than 0.1 million per month.
Nonetheless, in valuation terms cellular companies were the
toasts of corporate India. The average revenue per subscriber per month that the
Indian cellular operators get is commendable compared to the revenues DoT/MTNL
get from their fixed phone subscribers. However, this will be seriously
threatened once new entrants and Competitive Local Exchange Carriers (CLECs)
start providing more choices.
Last fiscal, the average revenue per month per subscriber in
the metros and "A" category circles ranged from Rs 900 to Rs 1,200.
While average revenue per month per subscriber in the "B" and
"C" circles ranged between Rs 500 to Rs 900. Pre-paid subscribers
contributed about 35 percent of the total subscribers. And it was higher in the
metros than in the circles. A post-paid subscriber averaged a talk-time of 150
to 180 minutes per month depending on the cities/circle. The pre-paid customers
on the other hand, often did not finish the Rs 500-package in a month.
Value-added services like information access, cellular data,
mobile e-mail, and mobile banking were introduced but were not very successful.
This was probably because of the SMS tariff levied for these services.
Interestingly, the response to these services was tremendous during introductory
phase when the services were given free.
Market Dynamics
Bharti Cellular (AirTel) piped BPL Mobile by Rs 5 crore to be
at the top, ending the fiscal with a services revenue of Rs 210 crore. Essar
Cellphone and Hutchison Max, which could be coming together under the Orange
brand this fiscal, appeared to be losing out to their competitors.
Among the metros, Delhi and Mumbai were involved in an
interesting duel for the top slot in terms of subscriber base. In the end, Delhi
emerged victorious. Other cities like Bangalore, Hyderabad, and Ahmedabad did
reasonably well.
There was tremendous growth in "A" category circles
and operators like Fascel and Spice Telecom gained in stature. Fascel did
amazingly well in Gujarat to touch revenue of Rs 108 crore. Among circle, Tamil
Nadu showed the fastest growth with its subscriber base more than doubling from
33,952 to 90,956. In this circle, Aircel Ltd, which had barely about 7,000
subscribers at the start of the year, swiftly caught up with the incumbent BPL
Cellular finishing the year with an impressive subscriber base of 40,252.
"B" category circles failed to live up to the
expectations. This could be due to the suspension of services in four of these
circles. Subscribers did not even migrate to other operators. The only circles
that did well here were UP (East) and Punjab, which had subscriber bases of
1,13,587 and 94,403 respectively. In Punjab, the penetration of mobile was
mainly due to the aggressive marketing of Spice Telecom, which together with its
operation in Karnataka, emerged as one of the most potential operators in India.
And, the fast growth in UP (East) was a result of the highly affordable mobile
services provided by Koshika Telecom there. Koshika today has the most uniquely
affordable packages among all operators in India.
The operators were once again found lacking in spreading
services across India. Their concentration on "lucrative" cities was
quite obvious from the fact that cellular services were quite cold in the
"C" category circles, while it was at best lukewarm even in some of
the "lesser" "B" category circles. In circles like the
Northeast, Himachal Pradesh, and Assam cellular had not reached beyond a few
thousand subscribers and a handful of cities. There was not even the proposal to
give licence for Jammu & Kashmir and Andaman & Nicobar Islands circles.
The Handset Market
It was a better year for the mobile handset market and an
estimated 7,92,195 handsets were traded. The legal market represented about 46
percent (up 6 percent from previous fiscal) of this. The gray market and seconds
trading together still accounted for the majority market share of 54 percent.
In terms of revenues, the legal market for handsets in India
was Rs 336 crore. The leading handset vendors in India were Nokia, Motorola,
Ericsson, Samsung, Alcatel, Philips, Siemens, and Sony. Most of their models
were cheaply available in the local super markets as "imported cellular
phones". The speed at which mobile phones reach the gray market is
incredible. Recently launched phone models like the Ericsson T28, Nokia 3210,
and Samsung SGH 600 are freely available in the gray market stores.
About one lakh subscribers changed their phones during last
fiscal. This was fuelled by introduction of several new models of phones by
vendors. Price drop in the legal market further affected it. Cellular phones
were available as cheap as Rs 7,000. In this grade, it was a game of matching
each other’s street prices. Hence, there was considerable price drops in the
low-priced cell phone market.
Indian cellular handsets can be categorized in three segments: Premium,
utility, and economy. The premium handset segment comprises handsets that are
priced above Rs 15,000. These consist of handsets like Nokia 9110, which have
the ability to surf the Internet, and the recently introduced WAP-enabled models
like Nokia 7110 and Ericsson r320s. The utility segment comprises handsets
priced between Rs 10,000 and Rs 15,000. Handsets belonging to this segment have
features like predictive text input and SIM toolkit applications capability.
They have better memory, are lighter and have sleek design. The economy segment
comprises handsets priced below Rs 10,000.