chandramauli 0 Report post Posted October 6, 2004 NEW DELHI: Indian mobile carriers are ringing in good times for users by furiously slashing call rates to boost usage and entice new customers into the world’s fastest growing major wireless market. But the price cuts could affect the long-term competitive structure of the sector and may force smaller carriers to fold, analysts say. “Short-to-medium term, it’s the subscribers who will benefit,” Arpita Pal Agrawal, senior manager for the telecoms practice at global consultancy PricewaterhouseCoopers, told Reuters. “But if the cuts are indiscriminate, then they could even price out the efficient players and may lead to reduced competition in the longer term.” The Reliance group, India’s largest mobile services firm, kicked off a price war about two weeks ago when it slashed rates for its prepaid users by up to 60 percent on calls made on its nationwide network. As a result, a one-minute local call on Reliance’s mobile service, based on the code-division-multiple-access platform, costs 0.99 rupees ($0.02) compared with 2.49 rupees earlier. Second-ranked Bharti Tele-Ventures Ltd., 28 percent owned by Singapore Telecommunications Ltd., followed with a similar cut. Others such as state-run Bharat Sanchar Nigam Ltd., India’s largest telecoms firm by sales, went a step further and cut domestic long distance call rates as well. “These cuts are aimed at increasing the addressable size of the market and the user-base as voice traffic will continue to be a cash cow for operators even for the next five years,” said Kobita Desai, principal analyst at the Gartner research firm. Rockbottom rates: Desai expects India’s mobile services market to expand at a compounded annual rate of more than 28 percent during the next five years to 718 billion rupees ($15.5 billion) by 2008. India has fewer than 10 mobile phone service operators, but some foreign companies have sought a stake in the competitive market. In June Singapore Technologies Telemedia Pte and Telekom Malaysia Bhd jointly bought a one-third stake in Idea Cellular Ltd, India’s fifth largest mobile firm. The Indian wireless unit of Hong Kong’s Hutchison Whampoa group, Hutchison Essar Telecom Ltd., is the country’s fourth largest provider of mobile services. Even before the price cuts, more than 40 million mobile users in India were paying some of the lowest call rates in the world — some even below one US cent a minute on a few plans. By contrast, a post-paid call in Singapore costs about S$0.12 per minute and a prepaid call is about S$0.28. Rockbottom rates are fuelling growth and luring 1.3-1.6 million new users into the market each month. But the flip side is that carriers suffer an erosion in average revenue per user (ARPU) — a crucial indicator of a carrier’s financial health. The effect of relentless price cuts is already visible on the average revenue per user at private GSM firms that account for 60 percent of the market. Although earlier cuts boosted total revenue by 8.4 percent to 26.3 billion rupees in the April-June period from January-March, the average revenue per user during the same time declined 6.7 percent to 402.12 rupees. Analysts say price cuts are necessary for operators as they roll out networks into India’s vast hinterland to woo first time users, who are mostly from the lower income groups. Lower infrastructure costs are also being passed on to users. “We anticipate some more action (on fee cuts) on the administrative costs related to acquiring new customers — primarily on the prepaid side,” Gartner’s Desai said. But small carriers are slowly losing the ability to handle the higher rollout and recurring costs. “Smaller carriers are again being pushed into the corner as they do not have the flexibility or a larger number of customers to spread out their fixed costs,” Agrawal said. reuters ____________________________________________________________________ Courtesy : Daily Times Share this post Link to post Share on other sites
