A wire-line telephone WiLL become like a wall clock. Every house will have one. But a cellular phone will be like a wristwatch. Everyone will have one.'' Coming as they do from a man who heads India's second-largest cellular operator, these words could be construed as a plug of sorts. But Sunil Mittal's quaint analogy is based, not on hope, but on numbers that his company Bharti Televentures, and the entire cellular industry accept today: 50 million cellular subscribers by 2005.

MAJOR PLAYERS
	Looking at new revenue streams, including mobile telephony in 1,021 cities beginning 2002-03, to make up for long-distance rate cuts. BSNL's emphasis in future growth efforts will be on wireless. D.P.S. Seth, CMD, BSNL
	Armed with 25 per cent of the cellular market, the BPL-Birla AT&T-Tata combine has surrendered the wireline licences it applied for, and is concentrating on cellular. No clear direction visible yet in the amalgamation process. R. Chandrasekhar, Interim CEO, BPL-Birla AT&T-Tata
	Having grown rapidly through acquisitions, Hutch grabbed three-fourth cellular licences. Its strategy is a pure cellular play in the metros and adjoining areas. Seen as not a long-term player but as one that will sell if the price is attractive. Asim Ghosh, CEO, Hutchison India
	Focusing on cellular services in Delhi and Mumbai to augment revenue. Has the required resources: capital and staff. But the PSU legacy and litigation has rendered MTNL much slower in comparison to fleet-footed private sector rivals. Narendra Sharma, CEO, MTNL
	The current toast of Indian telecom has excelled in mobilising funds and rolling out. Bharti is the only TELCO with positive EBITDA in all operating wire-line and wireless circles. But the Delhi cellular remains its greatest success story so far. Sunil Mittal, CEO, Bharti Enterprises

Just to put that number in context: one in every 25 Indians will own a cellular phone by 2005; and to achieve this target, the size of the cellular industry in the country will double every year for the next four years.

The 50 million forecast-and this doesn't take into account the mobile phones based on wireless-in-local-loop (WiLL)-is way above the Gartner Group's estimate of 30.9 million, but then, even the toniest of tech consulting firms couldn't have predicted the curious mix of regulatory, competitive, and evolutionary factors that has made 2002 the Indian cellular industry's 'point of inflexion'. Beginning March 2002, the industry will grow at 100 per cent every year. Beginning now, cellular rates will come down even more than the Rs 2 a minute subscribers pay. Beginning now, cellular phones will increasingly find their way into rural households. Technology will facilitate this. As will competion-MTNL's pre-paid cards, for instance are sure to cause tectonic tariff-shifts accross the industry.

Not convinced? Ask D.P.S. Seth, the Chairman and Managing Director of Bharat Sanchar Nigam Ltd (BSNL). The man's just moved into a new office in the stately Statesman House in New Delhi's central Connaught Place district from Sanchar Bhavan, the building that houses the Department of Telecommunications, a migration rich in laissez faire symbolism for a just-corporatised entity. By March 2003, stresses Seth, BSNL's 1,021-city cellular network will be in place. In 2003-04, mobile connections will account for 65 per cent of all ''lines added that year''. In 2006-07, they will account for 75 per cent.

True, phones that offer a 'limited-mobile' service, as the Code Division Multiple Access (CDMA) technology based on the WiLL platform are termed in India, will account for one out of every three mobile phones added by BSNL, but the bulk (the other two) will be 'propah' cellular phones-based on the prevalent Groupe System Mobile (GSM) technology. For those who came in late, early last year, in what can only be described as a bizarre bit of regulation-framing, the government decided to offer basic telephony companies the option of using CDMA-on-will to provide mobile services within a specified area. That, though, is a separate story, and a large one at that, despite many parts of it having already been written.

If things go well, India has a chance to be the next China as far mobile telephony is concerned. Between 1995 and 2001, the size of the cellular market in China exploded from 3.5 million to 117 million. ''This is the beginning of a major change in usage habits. The future is wireless because the nature of the customer is mobile,'' says Manoj Kohli, Escotel CEO and Vice Chairman of the Cellular Operators Association of India.

Why 2002? Most of the constituent factors of the boom in the making were in place by late 2001; it just required a final touch. That was provided by Bharti Telesonic's December 17, 2001, announcement that it would offer national long-distance telephony services for cellular-to-cellular callers at Rs 12 a minute, down from the Rs 24 a minute BSNL was offering (the company can't provide its service to lay users till BSNL and MTNL upgrade their exchanges to facilitate consumers access to Bharti Telesonic by dialling a specified code). Forced to respond, and maybe feeling the need to do one better than a new entrant, BSNL responded by cutting its tariffs to Rs 9 a minute-announced in a take-that-parvenu kind of press conference presided over by Union Minister of Communications and Information Technology, Pramod Mahajan (See Mr Congeniality).

BSNL's move was significant because it was prompted not by the regulator's tariff-rebalancing-in 1999, the Telecom Regulatory Authority of India, then under the stewardship of S.S. Sodhi, had recommended this, but nothing had come of it-but by competitive forces. ''The tariff rebalancing is happening in spite of the regulator (read new TRAI) and the government,'' says a senior executive at a multinational TELCO.

BSNL's move, however, could cripple the growth of basic telephony networks in the country. The great white hope of basic telephony in 2001, was CDMA-on-WiLL. Companies expected to roll out their services, and charge rentals as low as Rs 250 a month and Rs 1.20 for three minutes, on the strength of the share they would get of domestic long-distance calls originating on their networks. At 60 per cent, this was much higher than the 5 per cent BSNL allowed cellular operators. But 60 per cent of Rs 24 (Rs 14.40) is a whole planet away from 60 per cent of Rs 9 (Rs 5.40). Ergo, BSNL's knee-jerk reaction may well spell death for those companies that acquired basic licences in the post-WiLL context (Reliance may be an exception; see The Emperor's New Strategy). And those telcos seeking to provide basic telephony services the non-WiLLway could find the economics of the business very different from what they were till late last year.

MR CONGENIALITY

Pramod Mahajan: hogging the limelight Sharing the dais with British prime minister Tony Blair at the inauguration of Indo-UK Science Festival 2002 in New Delhi on January 16, parliamentary affairs and communication minister Pramod Mahajan said being a minister allowed him to make speeches in places he would not have been admitted to. The remark was meant to generate mirth and did. But it could well be a manifestation of guilt ensconced in the subconscious. Mahajan is making a habit of using his ministership to be present at any event related to telecom (it used to be just it till he got the communication portfolio as well) that is likely to hog headlines. And each of his speeches has the same leitmotif: don't bother me with details, I'm here to give you catchy quotes. The most striking of his recent appearances was on December 27 last year in Gurgaon at the launch of Bharti's fixed-line service in Haryana, when he called Sunil Mittal the telecom man of the year, and the very next day in Delhi when he announced BSNL's counter-offensive on long-distance rates and went to create the impression that BSNL would squash Bharti. A minister had no business being at either place. It may be because Mahajan's personal charisma is hard to resist for corporates. But they should perhaps begin discussing discretion in Cabinet meetings.

Even had this tariff rebalancing not happened-market forces should have inexorably, sooner rather than later, caused the regulator to act, but you never know-wireless access technologies, GSM, or CDMA, or whatever else, have clear advantages over wire-line technologies. ''Wireless is cheaper than wire-line,'' says Seth of BSNL, which boasts the country's largest wire-line network. The growth of telecom markets in several countries, most notably China, bears Seth out: between 1997 and 2001, China added around 80 million wire-line subscribers; in the same period, it did 105 million cellular ones.

The China experience also indicates that it takes a critical mass for cellular telephony to really take off. In India's case that number could well be the 6 million the country's cellular base will be by March 2002. ''Mobile phones will become the instrument of choice for voice,'' rhymes Mittal of Bharti.

That doesn't mean the basic telephony market won't grow, he hastens to add. By the time India has 50 million cellular connections, say some analysts, it could have 100 million wire-line ones. That isn't a very steep growth curve from the existing 35 million (a compounded growth rate of 41 per cent), especially when you compare it to cellular's impressive 102.7 per cent.

The bulk of wire-line growth could come from the corporate market. The economics of the business could make basic telephony companies go slow on the retail segment. And while BSNL insists that the loss it will suffer on account of lower long-distance tariffs will not in any way affect the expansion of its basic networks (an argument it had cited while reacting to TRAI's 1999 observation on domestic long-distance tariffs) fact is, 65 per cent of the connections it provides in 2003-04 will be wireless-40 per cent, GSM, and 25 per cent, CDMA. The last, Seth maintains is, when compared to GSM, ''a cost-effective solution in geographically spread out, or thinly populated areas.''

ILD TELEPHONY: A CASE OF DÉJÀ VU?

S.K. Gupta, Chairman, VSNL Expect to feel some déjà vu once private operators in international long distance telephony-the sector is to be opened up on April 1 this year-become active. There will be a spate of rate cuts, on the pattern of what happened in domestic long distance (DLD) telephony. Again, the price war is most likely to be triggered by cellular operators. The Cellular Operators Association of India (COAI) is looking at ILD as another opportunity to boost usage. ''Our focus is m2m (mobile-to-mobile). Once we have a private ILD operator, we will have seamless calls from, say, Ambala to Amsterdam, making it much cheaper than now,'' says COAI Vice Chairman Manoj Kohli. VSNL, whoever owns it then, will find itself in BSNL's shoes. What's more, Bharti Telesonic may again be in the forefront. It is perhaps the one company which has finalised its ILD plans, pegging the project cost around Rs 150 crore. Given Bharti's record of speedy rollouts, the company could do it again.

If 2002 marks the first of the great shifts for the Indian telecom industry-cellular (or wireless, since the great-WiLL hope isn't totally dead yet) becomes the growth engine-then 2005 will mark the second of the great shifts. ''That is when we expect the voice and data split on carriers to be 50:50,'' says N. Arjun, the CEO of Bharti Telesonic. Some analysts expect that to be BSNL's great comeuppance. ''It (BSNL) needs Rs 50,000 crore to upgrade its networks,'' points out a former Department of Telecommunications (DOT) employee who now serves an executive in a private sector TELCO. Seth pooh-poohs this, but says no amount of investment can be too much for a corporation that will boast an annual budget of Rs 16,000 crore to Rs 18,000 crore over the next five years.

The voice-data shift, though, is still some time away. This year, 2002, is set to be the year of the mobile. And if the future focus of basic telephony companies will be corporates and the top-layer of the urban populace, maybe cellular service providers will look to becoming the carriers of choice in rural areas. This will get a fillip if at least part of the cost of connecting villages is reimbursed from the Universal Service Obligation Fund, an issue TRAI is examining. ''Our cost of operation is already low. The cost of airtime for rural subscribers will go down further if some government levies like service tax are reduced,'' says T.V. Ramachandran, Director-General, COAI. That would be a truly radical solution to India's teledensity woes: look Ma, no wires.

THE EMPEROR'S NEW STRATEGY

Anil Ambani, MD, Reliance: a quiet play Reliance is looking at a combination of front-end services and back-end infrastructure. What can be likened to the fabled emperor's new clothes is the rationale behind how they are going about the front-end. Reliance has obtained licences to provide fixed-line services coupled with limited mobility based on wireless in local loop in 17 circles. It has bought highly advanced technology from Qualcomm Inc., which holds the worldwide rights to CDMA. WiLL-based limited mobility is however still under litigation. Avows Cellular Operators Association of India's Vice-Chairman Manoj Kohli: ''Our industry will fight it (WiLL) to the end.'' Reliance is, however, going about it in a way that suggests the issue is settled in its favour. Reliance is one of two companies, along with Bharti Telesonic, to acquire domestic long-distance telephony licence. But there is still no indication of its future course. Bharti has already announced its launch and triggered rate cuts in the sector. Reliance baiters say it has had limited success in telecom because lobbying isn't much help in the rapidly-deregulating sector. Secondly, its rivals are behemoths in their own right, negating Reliance's traditional strengths of scale and funding. Reliance, being what it is, can any day turn the tables through acquisitions, or if the WiLL case is decided in its favour. But again, there is the chance that three years from now, you may still be reading a piece on their telecom plans with the same headline as this one.

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