Sri Lanka : Airtel Fights Interconnectivity

India's leading telecom service provider with a customer base of as much as
7.17 crore users nationwide has been planning to launch its 2G and 3G services
in Sri Lanka under the name of Bharti Airtel Lanka for quite some time. A lot of
news has been coming from the island country that the existing telcos like
Dialog, Mobitel, Tigo, and Hutch see Airtel as a big threat to their existing
market. As Airtel enters the Sri Lankan market it will be the country's fifth
GSM-based service provider, and Airtel plans to make an investment of $200 mn in
the next five years. A large part of this investment, which amounts to almost a
whopping $50 mn, is being invested as the networks are being set up. A major
cause of the delay is because of non-cooperation from the Lankan telcos.

The reason for the non-cooperation might be because Airtel hinted that it
will reduce the outgoing call charges to Rs 2 per minute. But according to
existing telecom service providers they do not mind the competition, instead
would welcome Airtel. It was great news for mobile users at that time because
the average rate of a call was around Rs 6. Most of the mobile users like the
Dialog GSM customers were paying around Rs 7 per minute without VAT. While
Hutch, Mobitel, and Tigo customers were paying around Rs 5-6. Later, Mobitel
reduced their charges to Rs 2 within their own network and following that Hutch
also reduced to Rs 2. Recently Tigo launched three revolutionary packages called
T1, T2, and T3 which charge only Rs 3 per outgoing minute, just Rs 1 more than
Airtel's promised price.

Source: flicker.com

Bharti plans to start its $200 mn operations latest by the year end despite
all the delays in getting interconnection from the local operators. According to
Bharti, the incumbent operators in Sri Lanka are not providing interconnection
on the same terms as they practiced among themselves. But no matter what Airtel
is determined to start off with their services in this calendar year itself, and
is also in talks with the Sri Lankan telecom regulatory authority and other
operators on the issue.

In India, Airtel has topped the congestion list released by the Trai in
August this year. It was recorded that Airtel had the highest point of
interconnection with other networks and in the cycle Reliance Communication was
Airtel's closest follower. Airtel has faced congestion on 56 POI's in June while
the next rank goes to RCom's POI congestion at 22 POIs. The interconnectivity
comes as a big threat to telcos and has made it imperative for telcos to come up
with more infrastructural development to overcome the congestion.

The major problem that Airtel has in Sri Lanka is also that of the high
charge demanded by the existing telcos. The charge demanded from Airtel is about
50% of the outgoing airtime rate. On a simple comparative scale: the
interconnection rates in the Saarc countries reveals that the actual benchmark
ratio which is 25-30%, put against the amount charged by the Lankan companies.
It becomes quite evident that Airtel has to pay a high cost for every call made
from its network so that it is not able to offer affordable services to Sri
Lankan customers.

Airtel is also partnering with a few other companies like Singtel and Huawei
to launch its services on the island. Singtel, which owns a little over 30% in
Bharti Airtel, is a major player in the 3G space as it has already started third
generation networks in several markets across Asia. And if Airtel has it in time
it will perhaps be its first 3G roll out. Airtel has struck a deal with Huawei
to care for its networks. The deal is for three year, which includes looking
into the telecom applications and software. In the meanwhile Dialog's 3G trial
has been focused on the trial and validation of 3G equipment from multiple
manufactures, and has over the past year grown to cover a substantial part of
Colombo city. Over 1,000 customers have participated in the Dialog 3G trials
during this period. Dialog is the largest operator in the country, with nearly
62% of the market.

Analysts pointed out that with only 30% tele-density in Sri Lanka and growing
at a rate of approximately 2 mn mobile users per annum, Airtel has a good chance
of making inroads. Dialog has its ARPU as low as $4 per month. In India, despite
having the cheapest tariff in the world, operators get an ARPU of around $7.
With all these taken into consideration it lookslike Airtel will do fairly well
once it rolls out its services in Sri Lanka.

Sunny Sen

sunnys@cybermedia.co.in