Cellphones Fail To Set Tills Ringing

Champagne corks should be popping in the cellular telecom industry, but they are not. The reason for the industry it is both the best of times and the worst of times. To wit:

* The countrys cellphone user base is galloping at a scorching pace of 55,000 users a month. The total number of subscribers in India crossed the 700,000-mark this month, up from 500,000 in August. At this rate, India should have one million cellphone users by March 1998, a bare 30 months after the service started.

* On a launch-to-date basis (which measures the growth in the subscriber base against the year in which the service started) Indias rate of growth is the fastest in the industrys history, among comparable nations. India hit the half-a-million mark in two years; China and Thailand took six, Indonesia and Brazil four.

But the operators are a morose lot. Reason:

* Indians are using their mobiles less and less, resulting in lower-than-anticipated revenues. Usage time per month has dropped in metros from approximately 180 minutes 18 months ago to about 130 now: per subscriber revenue has correspondingly dipped from about Rs 1,500 to just about Rs 1,200 (even after increasing some charges). In the circles things are even worse: current revenue per subscriber barely nudges Rs 1,000 and these revenues are expected to fall as subscribers grow.

* Although the number of subscribers is clipping at an historic pace, the truth is that the cellular operators had projected a much higher number and quoted astronomical licence fees. For instance, just to cover a Rs 115-crore licence fee per year in Punjab, operators Modicom and Evergrowth will have to notch a user-base of 95,000 each at current subscriber revenues.

Bemoans T V Ramachandran, executive vice-chairman of the Cellular Operators Association of India: These numbers dont mean anything. Its all marketing hype. What matters is talk time and the per subscriber revenue.

Cellphone vendors, one tribe that could be expected to be happy at the growing subscriber numbers, are also not very peppy. Of the 55,000 sets being added every month, as much as 30 per cent some 16,000 are smuggled from Hong Kong, Singapore and even West Asia. Their advantage? They are far cheaper because they have no import duty, currently 53 per cent of the sets price.

Another 4,000 or so subscribers are not real buyers of cellphones; they just pick up new SIM (subscriber identification module) cards while travelling or buy new prepaid cash cards. This leaves a market of just about 35,000 handsets, to service which market leaders Nokia, Motorola and Ericsson have increased shipments in the last few months.

For an industry desperate for a silver lining, is there one? Yes, says the CEO of a cellular equipment company, pointing to a change in the trend of fresh additions. This time around it is not the metros which are leading the growth, but the circles (where growth potential is much more than the metros). Metro operators have added only 65,000 of the (nearly) 200,000-increase since mid-August.

It is the cellular companies in the circles that have added the remaining 135,000, more than double the amount in the metros.

Companies like Tata Communications in Andhra Pradesh and JT Mobile in Karnataka have managed to get some 16,000 and 13,000 subscribers respectively in less than a year since they launched service.

This is close to what RPG Cellular has managed to notch up in almost two years of operation in Chennai.

So, what is the verdict: should the industry uncork or not uncork?

The Hamletian dilemma emanates from the juxtaposition of Indias cellular growth rate with that of Chinas.India: 55,000 per month as compared to Chinas almost 700,000 per month.

Expected Indian total by fiscal end-97: one million China: 10 million.

Expected growth in the year: India 650,000. China: 8 million.

Champagne anybody?

Vinegar is what it should be more like, remarks Ramachandran dryly.