ECONOMY-INDIA: Cheaper Govt. Cellphone Triggers Price War

By Ranjit Devraj Reprint | | Print |

Ranjit Devraj

NEW DELHI, Jan 15 2001 (IPS) - A government telecom company Monday launched cheap cellular telephone services in India, triggering a price war with existing private operators.

There was a scramble for connections in the capital city as the state-run Mahanagar Telephone Nigam Ltd, better known by its acronym MTNL, opened bookings for the first 100,000 subscribers.

The government company, which monopolises fixed telephone line services in Delhi and India’s business capital Mumbai, will charge six U.S. cents for every ten minutes on outgoing calls.

Incoming calls will be charged at 0.3 cents for ten minutes — nearly half the rates charged by private operators.

“We will adopt a strategy to match MTNL tariffs,” said Sanjay Kapoor, chief executive officer for Air Tel — one of the two cell phone operators in the capital.

There are some 430,000 cellular phone subscribers in the capital city.

The government telephone company will also start cellular phone services in the western port city of Mumbai, beginning with 100,000 connections in February.

Mumbai presently has 465,000 cellular phone subsrcibers, serviced by two private operators.

The Cellular Operators Association of India warned that the entry of the government into the fray would deter foreign investment in the sector.

But not everybody shares that view. Hemant Sachdeva of Air Tel says he was confident of providing better services than MTNL to hold on to its clients.

India’s leading business daily, ‘The Economic Times’ said in an editorial that it was too early for MTNL to be celebrating, given the government company’s known inefficient ways.

‘We wish it success and hope it will make mobile telecom more competitive. But above all, we fervently wish that MTNL be privatised as soon as possible,” the paper noted.

Last year, MTNL launched its much-publicised ‘wireless-in-local- loop’ (WiLL), which works like an extended cordless phone with a range of about 20 km.

But, despite the demand for this cheap mobile service, it is still to take off because it was not promoted properly. The government telephone company was content with handing out 10,000 connections to politicians and bureaucrats, points out the Economic Times.

“Privatise these (government) behemoths before it is too late,” the paper advised.

Private companies, which have been granted licenses for basic telephony services, are pushing to be allowed to start WiLL services too.

Till the arrival of cellular telephony in India as part of the economic liberalisation policy begun a decade ago, the government monopolised all telephone services.

It took years to get a telephone connection, which normally could not be had without bribing officials.

However, MTNL’s entry into the cellular phone market is expected to bring the hand phone within reach of ordinary Indians who could not afford the high tarriffs charged by private operators.

Yet, cellular service providers and the industry have been able to attract foreign direct investment to the tune of 500 million U.S. dollars since first permitted and this has grown steadily at 78 percent.

This year, the government also reduced customs duty on mobile phones from 25 to five percent.

However, industry observers say the number of cellular phone subscriptions will really increase when incoming calls are made free and charged to the caller.

According to R.K. Pachauri, who heads the prestigious, New Delhi-based Tata Energy Research Institute, cellular phones can also be used to support development schemes in the countryside in the mainly rural nation.

He cites the example of Bangladesh, where mobile phone services are being used as a development tool.

One of Bangladesh’s best known non-governmental organisations — the Grameen Bank — has given cellular phones to women leaders who are part of the bank’s income-geneeration schemes.

“Most of the calls were made to find out market information saving people trips to markets in the cities — India has a lot to learn from the Bangladesh experience,” says Pachauri.