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GSM BUSINESS: One Shot, Two Birds Killed

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VoicenData Bureau
New Update

Reliance’s announcements succeeded in sending panic waves across the GSM

space, literally forcing all the big players to sit together and do some

brainstorming. One quick outcome was the announcement by the cellular industry

to cut national long-distance tariffs from Rs 9 per minute to Rs 2.99 per

minute, anytime, anywhere, for all mobile-to-mobile calls of 50 km and above.

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Cellular operators hope that GSM subscribers will now stick to their

respective service providers rather than switching to Reliance Infocomm. Even

BSNL responded to the cellular operators’ call by reducing the tariff in the

distance slab of more than 500 km and made its tariff look more attractive than

cellular operators in all distance slabs.

Cell

to Cell STD Cut
The

cut in cell to cell STD will help in reducing the market size from Rs 400

odd crore to Rs 150 crore. But is the existing network capable to handle

the increase in traffic.  
Cell

to Cell STD Tariff

Distance

(in

Km)

Cell-to-cell*

(in Rs )
Reliance**

(in Rs) 


BSNL (Plan 325)#

(in Rs)
Peak (9

AM-8 PM)
Off-Peak (8

PM to 9 AM)
0-50 3.20/min 0.40/min 1.20/3 min 1.20/3 min
>50-200 4.99/min 0.40/min 2.40/3 min 1.20/3 min
>200-500 4.99/min 0.40/min 4.80/3

min
2.40/3 min
>500 4.99/min 0.40/min 4.80/3 min 4.80/3 min
*

Airtime included at Rs 2 per minute. Cell to cell calls valid only in

networks like  Bharti, BPL

Mobile, Escotel, Hutch, Idea, Orange, RPG Cellular, and Spice.
**

Applicable only for Reliance to Reliance WLL (M) calls.
#Calls

within BSNL network.

With these announcements, industry insiders feel that the market size of DLD

will shrink from the existing Rs 4,000 crore.

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Even the cell-to-cell STD market, which contributes 10 percent of the overall

DLD market, will shrink from Rs 400 crore to Rs 150 crore, according to experts.

Although the decrease in the DLD tariff will lead to demand elasticity, experts

feel that cell-to-cell traffic is not going to increase in the same proportion

and it might take at least 2—3 years to reach the same level in revenue terms.

This might lead to a drop in DLD revenues for both Bharti Telesonic and BSNL on

the lines of the shrink in ILD revenues.

With this announcement, cellular operators feel that there will be a lot of

migration of long distance calls from fixed line to cellular. This will result

in faster growth of cell-to-cell STD traffic. But industry experts feel that

cellular networks do have problems of call dropping and call quality might

hamper the growth in cell-to-cell STD traffic. The reduction in tariff will

definitely result in increase in traffic but to accommodate that the cellular

service providers will have to do additional capital expenditure. The big

question here is: when cellular operators are making huge losses, why will they

invest in additional capex? And if they don’t do that, the surge in traffic

will lead to network congestion, which in turn will result in inferior voice

quality at a lower price. This is certainly not what GSM subscribers are looking

at as it can benefit Reliance Infocomm and basic service providers.

In terms of cellular tariff, BSNL is ahead of private cellular operators. And

now with BSNL and MTNL deciding for a seamless roaming between their networks,

without any roaming charges, they will be pose a serious challenge for cellular

operators. The battle is now open among three players–Reliance, BSNL—MTNL,

and cellular operators.

Pravin Prashant

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