Bharti is promising a network in Mumbai superior to that of BPL and Hutchison Sunit Mittal, Group CEO Bharti

Rupees 480 crore. That's how much cellular operators in Delhi and Mumbai could be racking up every month by the end of this year if, as predicted, the subscriber base in the two cities doubles in that time.

Sounds impossible? Perhaps not. Already, of the total cellular subscribers of 6.43 million in the country, almost a third are in Delhi and Mumbai. Of the 382,589 lakh subscribers added in March, 170,515 came from Delhi and Mumbai alone. In percentage terms, the national market grew by 6.3 per cent in March, but Delhi-despite its larger base-outstripped it at 9.2 per cent, and so did Mumbai at 8.9 per cent. Most analysts feel that the growth in the two markets is anything but saturated.

Yet, money won't be for the asking for the cities' mobile service providers. For one, competition just got a lot fiercer. As the fourth operator, Bharti is set to debut in Mumbai, and the heavyweight BPL-Birla-Tata-AT&T combine will do so in Delhi. There are already two other players in each of the cities: Hutchison, which has a tie up with Essar, and MTNL, whose Dolphin brand of mobile service-despite the disarray it is in-has 94,000 connections in Delhi and 1.06 lakh in Mumbai. Reason: cheap call rates and bills that don't come. (MTNL says it is still waiting for Tata Infotech to implement the billing software) With seasoned operators joining the battle, there'll be more sparks flying and blood spilt. Says Rajeev Chandrasekhar, CEO, BPL Innovision, trying to conceal the glint in his eyes: ''Delhi offers a lot of opportunity.''

Going The China Way

The cellular gladiators, however, have one thing going their way: phenomenal growth. The Indian telecom industry is tipped to follow what happened in China, which has 160 million mobile phones and 175 million fixed line subscribers, with cellular phones closing the gap on fixed line phones. Projections point to a figure of 50 million cellular phones by 2005 in India. The process will be aided by the increasing affordability of mobile phones and an expected rise in the cost of owning a fixed line phone as their operators-who can no more rely on the cushion of their share in long-distance revenues after the recent rate cuts-have been seeking a rise in rentals and tariffs.

For the new entrants there couldn't be a better time to expand the market. ''I think the entry of the fourth operator will primarily expand the market,'' says Sudershan Banerjee, CEO of Hutchison Telecom in Delhi, who frowns upon the use of fixed line phones in his office. He won't be complaining if what he thinks turns out to be true. Hutchison and MTNL will be facing a lot of heat, since they happen to be the incumbent operators in Delhi as well as Mumbai.

According to the calculations of Frost & Sullivan (F&S), a marketing, training, and consulting company, which is doing a valuation of the fourth cellular licences, a 20 per cent share of new additions in either Mumbai or Delhi will give the new entrant a million subscribers in the 10th year. Even if these subscribers run up a lowly Rs 500 in bills every month, operating breakeven will happen in the second year of operation, net profits in year five, and payback in year nine. ''You can make your project financially viable without weaning away a single customer from others if you manage to get a significant share of the new additions,'' says Anil Joseph, head of telecom practice at F&S. As a case in point, MTNL, most of whose subscribers are fresh ones, says it may become ebidta positive (profit before interest, depreciation, and tax) by end-2002 or early next year.

In a perfect world, Bharti in Mumbai and and BPL-Birla-Tata-AT&T in Delhi would plan their strategies according to Joseph's projections and Banerjee's hopes. All the four operators could live peacefully, something on the lines of the much-talked-about cosy relationship that Bharti and Hutchison enjoyed till recently, focus on branding and marketing, not try to take away each other's subscribers and in general refrain from firing salvos at one another. But telecom's is far from a perfect world.

Officially, there isn't much forthcoming on the strategy. But industry circles are abuzz that the fight, at least initially, could be ugly. There will be efforts to develop the market, but they will be accompanied by moves to make subscribers churn-that's the industry jargon for move across operators. And it's the churn subscribers that will bring in the moolah. ''Most of the high usage subscribers are already on board,'' says Atul Chopra, Managing Director, Asia Pacific Capital. Those who haven't yet felt the need for a mobile phone are unlikely to use it too much even if they acquire one. ''A profile of the existing market shows that 15 per cent of the guys give 50 per cent of the revenues,'' says Yogesh S. Bijlani, Vice President (Sales & Marketing), utStarcom. That means if the new entrant can take away even half of this creamy 15 per cent, a quarter of the incumbents' revenues will be gone.

Hutchison is installing a fourth switch in Delhi to take its capacity to 750,000 Ashim Ghosh, Managing Director Hutchison Telecom

The incumbents are aware of this threat and may well be firing the first salvo. The fortification is on. BPL in Mumbai has already introduced GPRs and set up 35 more base stations. Delhi operators too have been busy improving their network while trying to tap the latent market through schemes like Airtel's Youtopia and Hutchison's My First Connection plan. Hutchison, which has three switches in Delhi capable of handling 500,000 subscribers, is installing a fourth one, which will take the capacity to 750,000. MTNL is expanding the capacity of its only switch in Delhi to increase it to 250,000 from the current 100,000. The intent is to reduce the scope for a new operator to offer differentiated services and get as much of the untapped market as possible before the fourth operators gets in. Bharti has spent 20-odd per cent of its total expenditure of Rs 1,400-1,500 crore in the last six months, over and above the licence fee for fresh licences, on base stations, switches, and it equipment in Delhi and Mumbai.

''GPRs mobile internet and SMS chat are services that create real problems for any fourth operator to offer anything new,'' says Rajeev Chandrasekhar, CEO of BPL Innovision Business Group, who is widely expected to be the driving force in the merged BPL-Birla-Tata-AT&T.

Offence As a Way Of Defence

That is as far as the defence goes. When it comes to attack, the operators may quickly come down from their high horse of quality and coverage, and the first weapon may well be the one that has proved to be the most effective in every market: price. Grapevine has it that incoming calls in Mumbai will soon become free as BPL and Hutchison prepare to roll a red-hot carpet for Bharti. Chandrasekhar makes his intentions clear when he says: ''Delhi suffers a perception today of not only having the most expensive tariffs amongst the metros, but also the poorest quality of network. A fourth operator can therefore, walk in and address issues that the existing operators are not offering.'' MTNL could queer the tariff pitch further. Says J.M. Mishra, Chief General Manager (Mobile Service), MTNL: ''We will improve our network and customer care. But, at the same time, we will continue to pursue the slogan of affordability.'' Probe further, and he reveals that MTNL is hoping that its investments in mobile telephony will get amortised by the end of this year after which it will consider further tariffs cuts.

Bharti, too, is said to be ready to play the pricing game but on a different turf. Says a Mumbai-based analyst: ''Bharti, looking at a churn of business users, will leverage its footprint.'' With 13 existing and imminent cellular operations, it can offer lower roaming rates to subscribers if they stick with it instead of choosing to auto roam. It can also give special packages on long-distance rates, leveraging the strength of its long-distance arm, Bharti Telesonic. Chopra of Asia Pacific points out how AT&T, whose backbone covers all of US, offers the same calling rate across the country without any additional charge for long distance.

BPL-Birla-Tata- AT&T needs to quickly finalise a brand to grab customer attention R. Chandrasekhar, CEO BPL Innovision

The price war is, however, unlikely to last long. The tariffs are already low and there is limited room for lowering them further. Once the initial skirmishes are done, the battle could well move to other fronts. Says Anil Nayar, Head of Bharti's mobility division: ''No battles can be fought around tariffs. Ultimately, service delivery (read network coverage, voice quality, products on offer, value-added products, customer care, billing efficiency, ease of payment and account tracking) will be the key.''

According to the BPL-Birla-Tata-AT&T camp, Delhi could be an easier market to crack than Mumbai. That's because as a territory, it is much flatter and compact than Mumbai, which is surrounded by water (that's something not conducive to radio waves), and has many more high-rise buildings than Delhi. Therefore, a new network can be built much quicker in Delhi than Mumbai. ''Delhi is most vulnerable,'' says Sanjiv Aga, who has joined Birla Management Centre, but continues to be caretaker CEO of Birla-Tata-AT&T. He says BPL-Birla-Tata-AT&T will make sure its network in Delhi is based on the latest in engineering and quality, which would make it superior to the existing networks of Hutchison and Bharti. Chandrasekhar is quick to point out that Delhi's high subscriber base is misleading since nearly 60 per cent of that pie is made up of pre-paid connections. ''A large number of subscribers in Delhi will have no stickiness for loyalty and would be happy to move,'' he says.

However, Delhi may not exactly be a cakewalk for Birla-at&t-Tata. ''People don't churn for the sake of churning,'' says Nayar. The unspoken sentence here is that there is nothing Bharti's rivals can do that Bharti cannot. Secondly, Delhi maybe flat and compact, but its roots run deep into bureaucracy and legalese, making it that much more difficult to obtain clearances for cell sites. About equipment, what works for BPL-Birla-Tata-AT&T in Delhi also works for Bharti in Mumbai. Bharti chief Sunil Mittal told reporters in Bangalore recently: ''Our network in Mumbai will be superior to that of BPL and Hutchison, both of which are choked.''

The temptation to aim for the churn customers will become greater if the government allows number portability, which will enable a subscriber to switch from one operator to another while retaining his number. Most existing operators are expected to fight it tooth and nail. However, Bharat Sanchar Nigam, which is launching cellular services across the country, except Delhi and Mumbai, and will therefore be fighting with all the incumbents, is likely to push for it.

There are some who believe that it will, eventually, become extremely difficult to distinguish between operators on the basis of tariffs, quality, and customer care. That will be the time when branding will become all-important. Here, Bharti enjoys a clear edge over most of its rivals. Its Airtel is recognised as a strong all-India brand. Says Mittal: ''We can capitalise on the Airtel brand.'' BPL-Birla-Tata-AT&T, on the other hand, needs to quickly finalise a brand. Hutchison operates under Orange in Mumbai, Essar Cellphone in Delhi, Command in Kolkata, and Cellforce in Gujarat. While they are strong in their own pockets, the company feels the need to have an all-pervading single brand. Says an insider: ''We are launching the fourth operations in three south Indian states under a new brand. If this brand does well, it can be adopted in other operations, too.'' Alternatively, Hutchison may wait for the launch of third generation mobile telephony in the global arena. That brand may also become an all-world brand.

It may be difficult to predict who'll win or lose in the coming cellular wars. One thing's for sure, though. There never was a better time to be a cellular customer.