With COAI confirming that more sops are round the corner, the future of GSM operators depends on the government

Forced to announce another round of rate cuts due to the forthcoming entry of Reliance Infocomm into the mobile telephony space, cellular operators are depending on the government to weed out "policy anomalies" and revenue bottlenecks before they can be sure about their future survival.

At a joint press conference in Delhi, the operators announced a hefty cut in STD and roaming charges, from Rs 9 per minute to a flat Rs 2.99 per minute, exclusive of airtime rates, and irrespective of the distance called. The announcements, made on behalf of the operators by Union telecom and IT minister Pramod Mahajan, come into effect from midnight on 2 January, 2003 and will be applicable only to those service providers who are affiliated to the IndiaOne network.

Another announcement was that of further reduction in airtime rates shortly. However, COAI and the operators ruled out the prospect of free incoming calls before the CPP (calling party pays) regime was implemented, subject to approval by the Telecom Regulatory Authority of India.

"Our announcement of reduced STD and roaming rates today, and the other sops that we propose to announce every week from now on, are a short term measure—to ensure that our subscribers do not migrate to other service providers or cheaper technologies. We are hoping that the authorities will rationalize policies and remove anomalies like the interconnect charges to help us survive," said TV Ramachandran, secretary general of the Cellular Operators’ Association of India.

Asim Ghosh, CEO of Hutchison’s operations in the country, admitted that the latest round of rate cuts would be a body blow for the industry. "We are already bleeding and this will make the wound deeper. We expect the government to make the necessary policy changes and provide us with a level playing field in order to survive. GSM telephony rates in India are already the lowest in the world. We can’t cut rates further for too long and still survive," Ghosh said.

Apart from the burning issue of interconnect charges’—where cellular operators pay a fixed sum of money for every call that moves from the cellular to the fixed line or other government-owned networks—operators are also struggling to face the challenge of some discrepancies in government policy. "For one, there’s no entry investment or license fee payment made by WLL players, while we made huge investments on that front. Also, spectrum availability is an issue that needs to be resolved fast," he said, adding that this was causing concern over future expansion of the subscriber base.

As against the world average of 16-18 MHz of bulk allocation of spectrum per operator, Indian operators are allocated only between 4-5 MHz per player—this severely hinders rollout plans. Analysts agree that for the cellular industry, this has to be a "short-term move". Rothin Bhattacharya, head of consulting (telecom) at KPMG, said: "Unless the government comes up with substantial changes on the policy front—particularly on the spectrum allocation front—the future looks bleak for the cellular industry. Operators’ fixed investments have already been made, and they can control operating costs by rationalizing manpower, centralizing operations and restructuring distribution in the FMCG mode. But those savings will only cover a minor percentage of the extra losses that rate cuts will force on them now. The government needs to act, and act fast".

Rajeev Narayan & Balaka Baruah Aggarwal