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Wednesday, Mar 13, 2002

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`Basic telephony operators see creeping growth rate'

Kripa Raman

MUMBAI, March 12

THE subscriber base of private basic telephony operators (BTOs) in the country is only around 5.5 lakh, in poor contrast to the subscriber base of cellular operators, which has crossed the five million mark.

Hughes and Tata Teleservices have approximately 1.4 lakh subscribers each, in Maharashtra and Andhra Pradesh, respectively, Bharti has around 1.5 lakh subscribers in Madhya Pradesh, with its launch having just happened in Delhi and in Haryana; HFCL has around 55,000 subscribers in Punjab, Shyam Telelink has 30,000 subscribers in Rajasthan according to the Association of Basic Telephony Operators (ABTO).

The Reliance group is learnt to have around 2,000 customers in Gujarat. This low subscriber base as well as the halving of national long distance tariffs early this year have squeezed revenue flows to private basic service providers who fear their accumulated losses will rise and that further expansion of their networks may soon prove difficult. This is not to say that basic telephony in the country is not growing. ``State-owned companies, BSNL and MTNL, have added significant numbers, but they do not have huge fresh investments to recover,'' said a member of ABTO.

``This creeping growth rate in subscriber base is hardly allowing us to leverage numbers. It is further drawing out our already stretched financial viability,'' said the official.

BTOs get a 60-per cent share of national long distance revenues and a 45-per cent share of international long distance revenues.

``Local call volumes are not very high and local tariffs are not cost-based. We, therefore, depend on share in distance revenues which have also shrunk badly,'' said the head of finance with a private BTO.

MTNL itself could face a 25-per cent slump in revenues on account of the fall in NLD rates, said an official with the company. ``But we have a large subscriber base and can hope for some kind of volume elasticity to compensate,'' said the head of finance with a private BTO.

BTOs are now complaining that both lenders and vendors (who used to offer vendor financing) are viewing them with great caution. ``There may soon come a time when access to both becomes very difficult. It is already becoming difficult,'' said one BSO official.

``It is true. A part of the problem is to do with high regulatory uncertainty in the telecom industry. It is particularly acute with private basic operators, interconnect issues are undecided, we do not know whether tariff rebalancing is going to offer them some steps to viability. Because of these uncertainties, none of them have clear plans. All their value-added services, in the present economic situation, do not seem very attractive to their customers. Also they do not have the numbers or revenues to show. We have refused loans to a couple of them,'' said an official with a large lending institution. The problem might be less acute with large groups such as Reliance, Tatas and Bharti who are present across a vast spectrum of telecom services, said the official.

Even limited mobility, awaiting the order of TDSAT, disputes redressal body for the telecom industry, was not a certain solution for bailing out BTOs, said analysts.

``Entry costs are high. The rent works out to Rs. 450 per month, whereas one can go cellular on GSM with just a prepaid card of Rs. 300,'' said one of them.

``As for the lower limited mobility tariff, the GSM industry could easily match it with various new offers. Moreover, limited mobility can accept only five per cent of long distance revenues.''

ABTO has asked for differential pricing for their commercial customers as an interim measure till tariff rebalancing is implemented. `

`The existing rentals of Rs 160 to Rs 250 a month and the tariff of Rs 1.2 for three minutes is far from cost-based,'' said a spokesperson for an ABTO member.

The other fear is that if Internet telephony is allowed, then basic operators may be further impacted.

ABTO members said a clearer picture would emerge after large players with large footprints such as the Bharti and Reliance groups implemented their full rollouts.

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