Mounting Pressure

The burgeoning wireless phone industry is strengthening its presence and
thereby eaten into the wireline services. There are no new takers for wireline
phones across the country. The significant trend during the last fiscal was that
most of the private operators stopped expansion in wireline segment since they
feel that the growth in wireless sector will continue forever.

By the end of March 2009, total fixed subscriber base stood at 37.01 mn, 6%
less than the previous fiscal. In FY 2007-08, subscriber base was 39.41 mn. The
decline in subscriber base could be attributed to the fall of two Mumbai
headquartered giants- Reliance Communications and Tata Teleservices  Maharashtra,
which showed a decline of 72% and 37.9%, respectively. Reliance subscriber base
reached 0.11 mn by the end of FY 2008-09 from 0.4 mn, while
TTML fell from 0.87 mn to 0.54 mn during the period.

The subscriber base of market leaders-BSNL and MTNL, has plunged, but with a
lesser rate. However, their subscriber base is still very high as both of them
command a total of 88.9% of the market. The subscriber base of BSNL fell from
31.55 mn to 29.35 mn by the end of FY 2008-09. But despite the fall of 6.9%,
BSNL continued its leadership position with 79.3% of the overall market share.
The company also registered a dip of 7.7% on the revenue front, from Rs 20,500
crore to Rs 18,918 crore.

However, three players in the segment gained ground. Lead by the telecom
market leader, Bharti Airtel, Tata Teleservices and Punjab based HFCL were the
biggest gainers. The subscriber base of Airtel grew by around 20% to 2.73 mn.
Similarly, TTSL subscriber base grew by 18.75% to 0.38 mn capturing a market
share of 1%. HFCL Infotel, on the other hand, has witnessed a growth of 25% with
a subscriber base of 0.2 mn.

Desperate Times

There was a 3% fall in subscriber base of MTNL from 3.68 mn to 3.57 mn in FY
2008-09, while the overall revenue of the public sector, MTNL decreased to Rs
3,230 crore from Rs 3,555 crore, showing a decline growth of 9%.

During the last fiscal, MTNL launched various attractive tariff plans to lure
the customer, including unlimited calls between Mumbai and Delhi on MTNL phones.
IP based Internet telephony Bol Anmol service is also provided by MTNL for
making international telephone calls. MTNL is offering this service at lowest
rate of Rs 3 per minute for calls to USA, UK, Canada, Singapore, and Australia.
MTNL also launched IPTV services in Delhi.

BSNL's One India plan, which offers to call any number in the country at Re
1, is a huge success. The company is also looking forward for broadband market
in rural areas. It is the country's number one Internet service provider with 17
lakhs subscribers. Recently it has launched Sancharnet card. The Sancharnet Card
is a prepaid Internet access card with features like self-registration for
Internet accesses ID choice, renew of existing Sancharnet account and a wide
range of Internet access packages.

While for Airtel, Landline Zero monthly rental plans seems to have worked,
where users pay only for the actual duration of the call measured in pulses
beginning from the time the call matures. The innovative, which offers broadband
and voice in a single package, was also gave the needed fillip.

Growth Catalysts

The growth of private player is completely attributed to urban areas. In the
urban wireline market, 17.74% of the market share is occupied by the private
players, which is nearly 5% higher than their total market share.

The growth is driven by enterprise segments, which are migrating to private
players in search of quality service and suitable tariff plans. BSNL and MTNL
have come up with tariff plans especially designed for the enterprise users, but
due to lack of aggressive marketing it is yet to take off. Under a plan
targeting enterprise customer, the security deposit can be exempted for bulk
demand of five or more new connections.

However, in rural areas, BSNL continued to be the king. Despite targeting
rural telephony in a big way the market share of private players is almost
negligible with 0.34%. Rest of the share lies with BSNL.

Public Call Offices have also played a pivotal role in the success of private
players. The total number of PCO connections in the country is 5.9 mn. The
private players dominate the space with a 64.74% market share.

The Future

In the next five years, future of fixed telephony will continue to be with
the public operators. Airtel, the market leader in the wireless phones with a
subscriber base of 93.92 mn by the end of FY 2008-09, does not have any plan to
increase its market share in the fixed line as well.

However, the present growth of MTNL subscribers shows enough reasons for
worries for the operator. Airtel, by the end of year, had a market share of
7.4%, while MTNL is just a little ahead with a market share of 9.6%. Can Bharti
Airtel overtake MTNL in coming years? Our next year's analysis will have a clear
picture.

Airtel presently operates in Andhra Pradesh, Delhi, Gujarat, Haryana,
Karnataka, Kerala, Kotkata, Madhya Pradesh, Maharastra, Mumbai, Punjab,
Rajasthan, Tamil Nadu, Chennai, Eastern Uttar Pradesh, Western Uttar Pradesh,
Uttranchal, and West Bengal.

Interestingly its nearest rival TTSL despite having presence in Bihar, HP,
Orrisa — other than  Andhra Pradesh, Delhi, Gujrat, Haryana, Karnataka, Kerala,
Kotkata, Madhya Pradesh, Maharastra, Mumbai, Punjab, Rajasthan, Tamil Nadu,
Chennai, Eastern Uttar Pradesh, Western Uttar Pradesh, Uttranchal, and West
Bengal-where Airtel operates, have only 1% of market share.

The reason is the 360 degree aggressive marketing and branding of Airtel and
bringing broadband and telephone services under one umbrella. A part of the
success goes to array of services like innovative handsets, call conferencing,
call forwarding, easy hotline, additional number line, caller line
identification, time alarm, voice mail, parallel ringing etc.

The other major telecom player Reliance is nowhere in the picture, as far as
fixed line is concerned, with a market share of just 0.3%. Reliance lags behind
regional players including HFCL and Sistema Shyam, which operate only in Punjab
and Rajasthan respectively. Neither the Reliance's Next-Gen 'Intelligent FSK'
technology nor the ambitious Community and Free call club worked. Reliance has
been focusing more on the wireless front, especially on the recently launched
GSM.

Akhilesh Shukla

akhileshs@cybermedia.co.in