The Hindu Business Line : Playing the coverage card

Faced with declining average revenue per user, mobile operators, however, don't seem to favour price cuts. Instead, the focus is on boosting network coverage. The game is all about expanding into more circles.

A recent report on the Indian telecom sector from researchers at Credit Suisse underlined the operator's focus on providing the best network coverage.

The days of massive price wars and tariff cuts in the telecommunications sector seem to be over. Faced with constantly declining average revenue per user (ARPU), the new mantra that mobile operators in the country are banking on to woo subscribers is to avoid price cuts and compete on offering better network coverage.

So, be it Bharat Sanchar Nigam Ltd's punch line `Get Connected,' or Idea Cellular's campaign on `Stay Connected,' or the cute Hutch dog that `follows you everywhere you go,'mobile operators are going all out to be the first to go where no operator has gone before.

"It is a fact that Indian operators are offering the lowest tariffs in the world and with ARPUs declining, there is not much scope for a major reduction in tariffs. The focus now is to create infrastructure and offer better coverage to subscribers. It is a win-win for both the operators and the consumers," says T.V. Ramachandran, Director-General, Cellular Operators Association of India (COAI).

BSNL gets going

Leading the pack is the state-owned Bharat Sanchar Nigam Ltd, which has embarked on a $5-billion expansion plan to roll out its mobile coverage to the nooks and corners of the country.

BSNL, which already has one of the best mobile coverages in the country's hinterlands, promises to create a difference for consumers in its network coverage as compared to private operators. "We have already covered most of the national highways. In the next phase, we will be expanding our network to the remotest part of the country through jungles and villages so that our subscribers get the finest coverage," says S.D. Saxena, Director, BSNL.

Choppers, trucks, et al

And the public sector company is leaving no stone unturned to achieve its objectives. BSNL has even hired helicopters to ferry equipment and hardware needed to set up a cellular infrastructure in the upper reaches of Arunachal Pradesh and the North-East because there are no roads.

And if that was not enough, it is hiring fleets of trucks to carry diesel to power the huge generators that power the mobile stations (the centre of a mobile communications network in an area) because it is located in an area where the Government's electrification plans have not reached as yet.

Not to be left behind, Bharti Airtel has upgraded its capital expenditure estimates twice this year to $3 billion in 2006.

The company is doubling its installed base from 20,000 base stations to 40,000 by 2006, through a new contract for 60 million cellular lines.

The company has outsourced its network coverage requirements to Nokia and Ericsson who claim that they are in the process of setting up the world's finest network with state-of-the-art equipment and design.

"It was proven to our subscribers that Airtel's network was the best during the recent floods in Mumbai where our network stood the test in the form of floods and massive power cuts. Airtel was the only network that was operational," says a senior executive from Nokia who was involved in keeping the network from collapsing.

Similar plans are being worked out by other operators such as Idea Cellular, Reliance Infocomm and Hutch (see chart).

Race for coverage, capacity

A recent report on the Indian telecom sector from researchers at Credit Suisse underlined the operator's focus on providing the best network coverage. "All carriers seem to be in somewhat of a race for improved coverage and capacity. With the extra 300 million subscribers that we expect over the next four years and population coverage of only 30-40 per cent, we found a very aggressive approach from carriers in expanding investments.

With growth rates ranging from 20 per cent to 100 per cent, we also found the tone of carriers suggesting spending increases may not necessarily slow down in 2007," said the report.

Globally, too

The trend is not unique to India only. Internationally too operators are facing a crunch in terms of not being able to compete on prices, so are engaged in the warfare of providing better coverage.

So while Alltel claims it has the largest network, Verizon Wireless has launched itself as `America's most reliable network' and Sprint Nextel advertisements scream that `no one has a more powerful network' while Cingular says its customers experience the `fewest dropped calls.'

Home-ground realities

Cutting back home, market analysts point out that with 70 per cent of the country still to be covered, operators are spending billions of dollars to roll out their services and offer larger coverage area, lower dropped calls and higher speed of data connections and therefore they are not keen in indulging in a price war that could hurt their bottom lines.

Tariffs of cellular services have fallen from a high of Rs 16 per minute in the late 1990s to an average of Re 1 per minute at present. Last year, mobile tariffs dropped almost 60 -70 per cent, especially in the long-distance telephony segment.

The Government policy has also shifted focus on driving penetration and coverage. The last major policy with respect to tariff, the One India plan which offers STD calls at Re 1per minute, proved to be a damp squib with most operators jacking up the rentals to compensate for the decrease in call charges.

Therefore, now the Ministry of Communications has directed operators to improve connectivity. For instance, a massive Rs 6,000-crore project under the Universal Services Obligation is under way to set up 10,000 mobile base stations across the country in rural areas.

Consumer wins

For the consumers, all this should mean better coverage. So far, the promise of better coverage has remained mostly in punch lines and advertisement campaigns by the operators. A recent report from the Telecom Regulatory Authority of India (TRAI) has pointed out that the quality of mobile services in the country is way below the standards with high levels of congestion and call drops.

Consumers, who have enjoyed cheap mobile services till now, will surely hope that the claims of better coverage by the operators become a reality soon.

tkt@thehindu.co.in

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