Long distance telephony to see deluge of new entrants

Cellular service provider Idea Cellular, infrastructure providers with large optic fibre network (IP-II) Railtel, PowerGrid and GAIL (India) Ltd are contemplating entry into the national long distance business, though internet service providers are not enthused about providing restricted net telephony.

But Bharti Chief Financial Officer Akhil Gupta said that a mere reduction in the licence fee from 15 per cent of the adjusted gross revenue to 6 per cent of AGR from January 1 may not result in a steep fall in long distance tariffs.

"There is no major impact.... We can only pass on the benefit what we save and since we get a carriage charge of less than 50 paise, the cut envisgaes only a 8-9 per cent saving in cost and passing a component of this would result in a very small drop in call rates," he said.

Operators paid ADC to Bharat Sanchar Nigam Ltd to compensate for its unremunerative operations.

"Ninety-nine per cent of the cut would be passed on to the subscribers," Idea Chief Executive Vikram Mehmi said at a press conference.

BSNL executives said that the company will decide on tariff reduction over the next few days. "We don't know if it will be 9 per cent or more. It is going to be market-determined, especially if the number of players is going to increase significantly," said an executive.

ISPs fear pressure from access service providers which can provide a range of services from internet and broadband to voice services. A large number of players may not be interested in entering the restricted voice telephony business due to the 6 per cent licence fee.

"We are open to it. We are studying the segment's business potential. Licence fee is not the issue any more," Mehmi said when asked about plans for entering the long distance business.

Railtel managing director KK Bajpayee said the company was eyeing the business emanating from the government. "At present, with the IP-II and VPN (virtual private network) licences, we cannot provide services to the public sector," he said.

"This license (national long distance) will also enable Gail to provide VPN services to (the) entire corporate sector and in particular 500 business houses who are already buying natural gas and are well connected with GAIL's OFC network," GAIL said in a statement.

PowerGrid Chairman and Managing Director RP Singh said that the public sector company will also explore the possibility of a joint venture with Gail and Railtel for a joint foray into the business.

The government's decision to reduce the licence fees to Rs 2.5 crore (from Rs 25 crore for NLD and Rs 100 crore for international long distance) is expected to result in the entry of many new players and better capacity utilisation of existing optic capacity.

Railtel, GAIL and PowerGrid have the right of way along the railway lines, gas pipelines and the transmission network, respectively. Bharti and Reliance Infocomm also have a large optic fibre network covering the length and breadth of the country.