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Business
CDMA operators make headway
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CDMA is a better technology than GSM while GSM is more efficient than analogue. The frequency spectrum is a limited resource and when this is shared among many more players, everyone gets a smaller piece of the pie.
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THE ENTRY of Reliance Infocomm into the wireless telephony arena has signalled the onset of another price war albeit this time it is between Reliance's CDMA (code division multiple access) based limited mobility services and the global system for mobile communication (GSM) or cellular players.
Reliance's tariff plan offers limited mobile services at 40 paise per minute which is a third of what was offered by cellphone companies with incoming calls being free.
The tariff prescribed by the Telecom Regulatory Authority of India (TRAI) for limited mobility is Rs. 1.20 per three minutes and Rs. 200 as monthly rental. Reliance's IndiaMobile service has threatened the domain of the cellular players and its Dhirubhai Ambani Pioneer plan tariff card offers 400 minutes of free outgoing calls for a three year subscription of Rs. 14,400 and a free handset.
"CDMA is a better technology than GSM and GSM was more efficient than analogue.
The frequency spectrum is a limited resource and when this is shared among many more players, everyone gets a smaller piece of the pie and therefore each one needs to make investment,'' said Dilip Modi, a telecom consultant and former senior executive at British Telecom and former vice president, Hughes Telecom (India), adding, "The real issue is the cost structure. Are the services being offered at affordable, sustainable rates or is it just predatory pricing? Unless you have clear transparency in cost structure in the public domain (accounting separation), that would be difficult to determine.''
The technology for a GSM or cellular operator involves dividing a band of frequencies in a frequency spectrum into many compartments and these bands are handed out to different operators. They have to confine all activity to these bands and tune their frequency to it. The frequency is therefore re-usable with geographical gaps in between. This constitutes TDMA (time division multiple access) for the GSM (global service module) cellular technology following the European model according to the decision taken by global players in 1995.
In CDMA, there is no division but the whole band is given to an operator who only transmits signals in a codified manner. The advantage is that the same frequency band can be used repeatedly and it is therefore also called Spread spectrum. A decision was taken in 1998 among global players and standards were put in place.
Of the 125 plus licences issued by the Government for WiLL services (wireless in local loop), Reliance has 18, Tatas 8, Bharti 6. Currently, the issue for Reliance is getting an interconnect agreement in place for calls to be made from its CDMA phones to GSM phones although that will only be a question of time.
The other big player in this arena, Tata Teleservices (TTSL), also launched its services early in December and has already met with significant success. Having started out with a planned capital outlay of Rs. 7,500 crores for its CDMA telephony business, TTSL launched `Tata Indicom' (CDMA service brand) in Gujarat, Karnataka, Tamil Nadu and Andhra Pradesh with Delhi services being the latest launch of December 19. According to the company, to date, the company has garnered 4.7 lakh subscribers.
This, however, includes the two lakh subscribers for landlines services of Hughes Telecom which was taken over by TTSL. Since launch, the Delhi circle has already notched up 10,000 subscribers while Andhra Pradesh has more than 2.3 lakh subscribers.
Unlike Reliance's offer, TTSL's `Tata Indicom' does not have bundled options and no lock-in period. The company would also arrange for finance schemes and the imported handsets from LG and Kyocera are available for Rs. 5,000-7,000. The Standard plan entails a monthly rental of Rs. 200 with no minimum commitment or free local pulses. The call charges are at Rs. 1.20 per three minutes with an activation charge of Rs. 1,000. The Standard plan entails a security deposit of Rs. 2,400 for local call services and Rs. 4,400 for local/STD and Rs. 4,400 for local/STD/ISD services.
Under its Friend 599 scheme, security deposit is waived for local service, while for local/STD, it is Rs. 1,000 and Rs. 2,000 for local/STD/ISD. While there is no monthly rental, a minimum commitment of Rs. 599 is charged and the subscriber would receive 400 free local pulses (worth 1,200 minutes).
The other player to have launched CDMA services was MTNL's `Garuda' that was launched almost two years ago but failed to take off.
The Garuda service was unable to provide the services effectively. The frequent call drops were due to the fact that there were insufficient cell sites and other teething problems.
Cellular operators are saddled with accumulated losses of Rs. 7,700 crores which is almost a third of the Rs. 25,000 crores invested in the sector. There is, however, a move to try and bring down the licence fee for the cellular operators — to more acceptable global levels of 2-4 per cent.
Long distance tariffs crash
The total long distance market is Rs. 12,500 crores. In the near future, cellular operators are expected to announce a cut in international long distance rates. Reliance, at the launch of its CDMA services had, on December 27, announced a long distance tariff of 40 paise per minute for its CDMA service.
In response to Reliance's offer, last week, cellular operators announced a cut in cellphone-to-cellphone long distance tariffs by two-thirds to a flat Rs. 2.99 per minute from the earlier Rs. 9. However, subscribers making long distance calls in the 50-200 km range will pay 60 paise more than Rs. 2.40 they were paying earlier. This move is expected to cost operators an extra Rs. 300 crores.
Ramnath Subbu
in Mumbai
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