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PCO MarketPlace: An Indigenous Flavour

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VoicenData Bureau
New Update

For a country with one billion people, telephone for all is only a distant possibility. A telephone connection for each and every individual is not only impossible but also not affordable. But there is little doubt that PCOs can help fulfil the demand of telephone everywhere. As on 30 September 1999, there were 22.63 million Direct Exchange Lines (DELs) with the teledensity just over 2. If this is the present status, after privatization got introduced in 1994 and with another Telecom Policy coming up within five years of that, the scene during the Eighties is anybody’s guess. And that was the time when Sam Pitroda had come up with the novel concept of PCO booths. Today, many believe this to be an indigenous way of solving the problem at hand. Little wonder that this is a market completely unique, with no parallels around the world. While across the world, in the developed countries, the payphone market is the norm with close to 80 percent or more of the market share, in India it is the reverse. It is only the PCO market. The payphone or coin-phone market size is negligible at its best.

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Is there a Market?



Many PCO vendors are convinced of the potential for PCOs for primarily two reasons. One, there is a need for telephone connections reaching to more places. Two, the government has promoted this and in future too it will
continue to do so to meet its overall objective. Says S Balasubramanyam, GM, marketing, Linkwell Telesystems, “ The policy is that for every 1 lakh lines released per month, 5 percent would be released for PCO booths.” This is the ball park figure. Pankaj Patel, partner, Computer Peripheral Devices (CPD), too believes that the policy for release of lines for PCOs is changing with changing requirements and geography, but one PCO for 500 persons is itself a good number. It is clearly a DoT driven market. DoT’s local and STD PCO target for this year is estimated to be over 80,000. An impressive 50,000 PCOs were commissioned from April-November 1999. 

As of end November 1999, the total PCOs installed in the country were 5,85,396. This figure does not include the 118 national highway phones. All these taken together would mean a total of 590,601. 

The market size for the PCO vendors as of November last year is estimated

to be around Rs 65-70 crore. “The market value of this industry would not be less than Rs 90-100 crore,” says Balasubramanyam. And according to Patel, this sector has finally emerged as an industry and though the potential is huge, the shift will be towards the semi urban and rural sectors. True.



Today the PCO concentration is in Andhra Pradesh, Gujarat, Karnataka, Maharashtra, Punjab, Tamil Nadu, and the four metros. In fact, only about 13 telecom units have over 25,000 PCO population. While MTNL, Mumbai area has about 60,000 PCOs, Maharashtra, Andhra Pradesh, and Gujarat with 51,500, 48,000, and 41,600 odd PCOs respectively lead the way. In 1999, it is expected that Andhra Pradesh, UP (East), and Mumbai would be adding around 8,000 odd PCOs each over that last year. Future opportunity would come from Madhya Pradesh, UP (East & West), Rajasthan, Bihar, and the Northeast. 

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With the Government laying down a target of teledensity of 7 by the year 2005 and 15 by the 2010, the PCO market opportunity would get better and better. The Dynamics



Today, it is believed that there are as many as 120 companies manufacturing PCO equipment. In fact, this is the only industry where there are no MNCs. Says Patel, “It may appear that there may be so many vendors, but in effect, there would be about 20 manufactures.” The reason is many are local manufacturers and may have obtained a TEC approval to
manufacture, but may be restricted to only a single area or two. Why only Indian manufactures? “This market is a different ball game all together and is unique to India,” reveal some of the vendors. This is a market where the vendors have to supply their products to people who are not very literate technologically. Furthermore, it has to be realized that the Indian society needs the cash and carry method, i.e., they are still not in a habit of the card culture. That is why it is only PCO market and not payphone market like else where. While in the west it is decremental form of billing, we have an incremental form of billing, i.e., in India one makes a call depending on the money in pocket. Further more, many of the people who go to the PCOs need assistance in terms of dialing numbers too.

The market is clearly dominated by the Computer Peripheral Devices (CPD range of products) and Linkwell Telesystem (Visiontek range of products). The duo together holds close to 75 percent market share. Says Patel, “Two years ago we had close to 60 percent market share, but that has come down.” Though the exact valuation is difficult, as each of the two is strong in different regions, it is estimated that both are competing neck to neck–each having a market share between 35-40 percent. While Linkwell is the leader in Andhra, CPD dominates in Karnataka. While Metascan and Digicontrols are the other major brands behind these two, Goldtron is very strong in the north, TeleI is strong in Calcutta, and Microcontrol is a good competition in Mumbai and Pune.

An important feature in this business is that the margins for the dealers are very high. The margins vary with the type of equipment. A rough estimate suggests that it would be anywhere between 10-15 percent. The margins would be close to Rs 3,000 for Rs 18,000 equipment and about Rs 2,000 for Rs 12,000 worth equipment. This is a high margins industry, as a high level of customer-service needs to be offered. The instruments are sold to not very technically qualified customers, and if there is any problem with the instrument or revision of tariffs these need to be handled immediately. Though the prices are dictated by the local competition, the prices of a PCO today range between Rs 10,000-18,000 depending on features. 

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The market today is split into two segments–the low-end and the high-end. The high-end basically involves the conferencing capability features. Main reason for the prices not going up is that the PCO owners plan for a total investment of Rs 20,000-25,000.

Will the payphone market be a spoilsport? Though the local coin payphone market is

insignificant in size, it is witnessing a gradual rise. MTNL Mumbai has taken the lead where there are about 45,000 coin payphones installed at present. But a uniform policy is required to give it a major boost. Says Patel, “To start in a big way, the payphone market needs to be well promoted. It can be done only if the distribution model and volumes reach mass scale.” 

This is an industry with a good opportunity for exports. If the Government of India can take initiative with governments of many African countries and the SAARC countries, it will mean further growth. It is encouraging to note that what was earlier thought to be only an employment opportunity, is presently being seen as a major sector of growth.

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