New Levies Favour Cell Firms In Metros

Cellular telecom services companies in metropolitan cities are likely to benefit from the revision in telecom tariffs proposed by the Telecom Regulatory Authority of India (TRAI) last week, while operators in the circles (mostly analogous to a state) are likely to find it difficult to implement the recommendations.

TRAI has proposed that the monthly rental charges for the cellular service be increased from Rs 156 to a maximum of Rs 600 and the peak usage tariff be brought down from Rs 16.80 a minute to Rs 6. While computing costs, the regulator used the cost data of metro service operators as a benchmark.

It has also proposed to make all incoming calls into cellular systems tariff-free. Right now, incoming calls are charged at the same rate as outgoing calls, between Rs 2 and Rs 16 depending on tariff plans of operators. The tariff revision, according to TRAI functionaries, is long overdue given the costs of offering the service.

Sources in the cellular industry feel that the metro operators, two each in Delhi, Mumbai, Calcutta and Chennai, will be able to hike the rental charge from Rs 156 to Rs 600 a month. Said Sunil Mittal, chairman of Bharti Cellular, the Delhi operator, "The purchasing power in the metros is enough to justify Rs 600 a month. We will perhaps bundle some free airtime with this to lure in new customers."

Delhi operators, Bharti Cellular and Sterling Cellular, have been recording some 120-130 minutes airtime usage a month. The operators in Chennai, Skycell Communications and RPG Cellular, and Calcutta, Modi Telstra and Usha Martin Telekom, have also been recording similar airtime usage patterns.

Such usage along with charges for features like caller line identification, voice-mail and short messaging have yielded a revenue of between Rs 900 and Rs 1,200 in these cities. In Mumbai, however, the average revenue per user is higher since the monthly usage is higher at between 170 and 200 minutes.

On the other hand, cellular operators in the circles are likely to find it difficult to charge customers Rs 600 a month. Says Mittal, whose group company Bharti Telenet is offering the service in Himachal Pradesh, "We will find it difficult to charge Rs 600 there." The population in the circles has lower purchasing power and Rs 600 a month will be seen as a hefty entry barrier, he feels.

Admits the chief executive of a south-based cellular company, "We are not yet sure how the tariff recommendations will impact the average revenue per user. But, yes, we are going to find it difficult to charge the full Rs 600 a month." He feels that companies will perhaps charge a lower rental of some Rs 300-400 and bundle free airtime with it.

However, analysts point out that cellular companies will gain from incoming calls being made free. In Delhi, for instance, incoming calls account for some 50 minutes of the 120 minutes of monthly use. This service being made free, it is expected to go up significantly "up to 100-110 minutes, taking up the monthly average to about 200 minutes", according to an analyst.