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N. Ramakrishnan

CHENNAI, Sept. 17

CELLULAR subscribers and those with a propensity to go mobile in Chennai have never had it so good. They now have three service providers to choose from, each offering an array of both pre- and post-paid schemes.

More importantly, average tariffs across plans have, by some reckoning, dropped by at least 50 per cent in the last six months. The entry of Hutch in July saw a further drop in tariffs and the operators have come out with new schemes to retain their subscribers and attract fresh ones.

What does this mean for subscribers and for the cellular industry in Chennai? All the three operators — RPG Cellular Services, Bharti Mobinet Ltd, and Hutchison Essar South Ltd — are convinced that the market will only expand and the subscribers will benefit even more. Their reasoning is that cellular penetration in Chennai, which traditionally occupies the third position in other areas, is less than five per cent. Therefore, entry of new players will only increase awareness about the facility, the companies say.

Moreover, the State-owned BSNL has been talking of launching its cellular service for quite some time. That, with the imminent launch of limited mobility using CDMA (Code Division Multiple Access) technology by companies like Tata Teleservices will only add to the subscriber base, probably result in further reduction of tariffs, and an even greater widening of the cellular market, according to officials in the three cellular companies now servicing Chennai.

However, the companies also sound a note of caution — any further drop in tariffs will be harmful to the companies. Points out Mr Kumar Ramanathan, Vice President — Sales & Marketing, Hutchison Essar South Ltd, average tariffs in Chennai across different plans have fallen by 30 per cent since July, when Hutchison launched its services.

"The fall is a little more precipitous here than for a place like Mumbai, where the drop would have been around 20 per cent. Also, Mumbai is a low tariff market compared to Chennai," he says.

Mr Arun Sikka, Vice President — Marketing, Sales & Customer Service, RPG Cellular Services Ltd, concurs and adds that tariffs should not go down further as it will then be counter-productive in terms of affecting the profitability of the operators.

Besides the fall in tariffs, what has really happened with the entry of Hutch is a heightened awareness in the market. Mobile penetration in Chennai and its suburbs is estimated to be less than five per cent of the population and the cellular operators believe that this number should definitely go up.

"We felt that Chennai was under-performing vis-à-vis potential. If you take any product category, Chennai is the third largest market while, strangely, it is ranked sixth in the cellular area," Mr Ramanathan said.

It is here that Hutch decided to target the customers with what it believes are unique products and features. Its emphasis has been on value proposition and brand-building. Mobility is not only about carrying voice, says Mr Ramanathan and adds that the unified messaging system for the post-paid customers of Hutch is one such unique product.

According to him, Hutch signed in about 13,800 subscribers in the first month. Industry analysts say that a majority of them will be pre-paid customers, whose loyalty to a particular brand is always in doubt. However, Mr Ramanathan adds that pre-paid is the engine for growth and there is always a possibility that most of them will shift to post-paid once they are convinced of the quality of service provided.

According to him, while the Chennai market normally adds about 7,000-8,000 new subscribers each month, this figure more than doubled since Hutch's entry. According to Mr Raja R. Peter, General Manager — Marketing, Bharti Mobinet Ltd, Hutch's entry has heightened awareness in the market. "This market has huge potential and we have just scratched the surface," he adds.

Mr Sikka says the entry of a new operator lends more visibility to the service and there is also increased trade activity — that is the number of dealers will increase and more people will be on the road trying to sell the service and product. There is also greater consumer awareness of what cellular service can deliver and expectations go up in terms of pricing or service standards or network availability.

According to the cellular operators, there is a normal seven to eight per cent churn in the customers, especially in the pre-paid category. Among the post-paid customers, the churn is much lower — about two-three per cent.

They say that one significant change that has happened in the last few months, more so since Hutch's entry, is that the bias in favour of incoming calls as far as call charges are concerned — incoming calls were charged much lower than outgoing ones — has changed. A tariff re-balancing has definitely taken place, according to Mr Ramanathan.

This means that the cellular operators are encouraging their subscribers to not just receive calls, but also make calls — increasing the usage of the service.

With falling tariffs, cellular operators are convinced that increasing usage is one way to ensure that average revenue per user (ARPU) does not fall very low. The industry figure for ARPU is believed to be about Rs 1,100 while it may vary from operator to operator. The operators are also concentrating on introducing more value-added services to the subscribers.

As Mr Sikka points out, value-added services have not really taken off. Only the SMS (short messaging service) has really caught on, but operators like Bharti are bringing in services like music messaging and concierge facility for its subscribers.

According to industry analysts, cellular operators have an urge to go in for pre-paid customers as they will be able to show numbers — something that their stake-holders and lenders will be looking for. However, they have to balance between pre-paid and post-paid and it is in striking this balance that the cellular operators have a real challenge before them.

They point out that numbers do not necessarily mean higher revenues or ensure their survival.

In this, they draw a parallel to the dotcom boom when everyone was after eyeballs, without ensuring a sustainable revenue model. While the operators slug it out, the customers benefit.

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