Koshika Tele Offers Free Handsets Under 2-Yr Scheme

Koshika Telecom, the cellular licensee in Uttar Pradesh (both east and west), Orissa and Bihar, yesterday announced a two-year scheme which offers cellular handsets free. Under the scheme, three cellphones -- one each of Alcatel, Ericsson and Nokia -- are on offer for its customers.

A customer can choose between Alcatel HC 800, Ericsson GA 318 and Nokia 1610 "for just Rs 14,472 provided he guarantees to avail airtime worth Rs 603 per month" for two years, Navaid Khan, vice president of Koshika said. The company operates the service under the Ushafone brand name.The handsets are priced between Rs 12,000 and Rs 14,500 in the market. However, cellphone vendors are offering them to service providers at 'bulk discounts' of Rs 3,000-5,000. Thus, the effective cost that service providers need to subsidise varies between Rs 7,000 and Rs 11,000 per subscriber.

This is for the first time in India a cellular provider has announced a scheme which offers the handset free. In advanced cellular markets like the US and UK, companies have offered schemes -- dubbed bundled schemes as they make up the cost of the handset through assured airtime usage -- successfully.

Koshika had surprised the cellular industry last year when it announced a tariff of Rs 2.70 per minute during day hours and 90 paise for calls between 11 pm and 6 am. Most other cellular providers have been offering rates between Rs 6 and Rs 16 per minute in day hours and a minimum of Rs 3 during late night hours.Industry analysts and competitors have predicted Koshika will run into financial trouble after a few years because its revenues will not cover the costs involved in setting up a cellular network.