Woe, sickly, scrawny, sorry, Misery, Doleful, and Puny. No, these aren't the names of the seven dwarves in a valetudinarians' production of the ageless fairy tale; they're this correspondent's sobriquets for the seven cellular telephony companies that will soon be operational in Delhi, which boasts 1,474,203 connections and Mumbai, which does 1,415,132. .
That's not what the script says. After all, analysts hold up Idea Cellular's November 7 launch in Delhi as the milestone, when service-quality and value-adds replaced tariff as the most relevant marketing tool in the business. The analysts are right after a fashion. Idea has tried to make things better: it offers pre-activated roaming on and a choice of tariff schemes for pre paid connections and value-adds such as always-on Internet and multi-media messaging (MMS) for post-paid ones. The tariff game, explains Himanshu Kapania, Idea's Delhi-COO, is history. "Anyone looking to play it will not be able to support large-scale investments in infrastructure." And the business of telecom is as capital intensive as businesses can be.

Idea's tariff-light strategy for Delhi -- its launch was delayed over issues related to spectrum allocation -- may well have been rewritten after AirTel's foray into Mumbai. "It went berserk on pricing," says an executive at a competitor. In 40 days, its subscriber base had soared to 100,000. Now, say competitors, it is facing significant churn and the low tariffs are hurting its profitability. AirTel dismisses claims on both fronts. "We did offer some freebies in the beginning," says Anil Nayar, President (Mobility), "but essentially, no price cuts". "And there has been no churn away from AirTel in Mumbai."

Still, the analysts are wrong, very wrong, after a fashion too. At the time this magazine went to press, the Supreme Court had heard all arguments regarding limited mobility on cdma by basic telephony companies and had reserved its judgement. If the court gives the go-ahead, Delhi and Mumbai will have three more mobile telephony companies (Go on now, you don't expect us to be taken in by that 'limited mobility' thing?), Reliance Infocomm, MTNL, and Tata Teleservices. And tariff-based strategies will be back in fashion.

Exhibit A: Reliance's tariff-filing with the Telecom Regulatory Authority of India, which lists an air-time charge of 20 paise a minute, a 15-second pulse (a 15-second quickie, then, will cost 5 paise), and free incoming calls.

Exhibit B: The standard limited mobility tariff structure of Rs 1.20 for a three-minute call and free incoming calls.

If existing cellular telephony companies can't match A, they'll surely try and match B. They have to: eight out of every 10 subscribers churn for tariff-related reasons. Only, under the prevailing interconnect regime, these companies will then earn nothing on calls -- they pay interconnect charges of Rs 1.20 a minute to BSNL and MTNL for connecting to their fixed-line networks. Nor will the providers of 'limited mobility' make money: at published tariffs, their business models are unviable -- CDMA networks cost quite a bit to put up.

Statistics may reveal a cellular penetration of 10 per cent in Mumbai and Delhi, far short of the 30-35 per cent in cities in South and South East Asia. While that proves the existence of a market, companies can't cater to it, not unless they are willing to make losses in perpetuity. The government and the regulator could make things better by defining new terms, conditions, and tariffs for both cellular telephony and limited mobile services. If neither does it we'd best get set to welcome Woe, Sickly, Scrawny, Sorry, Misery, Doleful, and Puny.

-SUVEEN K. SINHA

INC PLOT
Why Telcos Should Learn From Banking
True, banks are as 'old economy' as you can get but they could give telcos a leg up where they need it the most -- forging of long-term ties with customers.

Banking is an ancient business with its history dating back to the 13th century when the first bill of exchange was used as money in medieval trade. In Italy, in the late 1200s the Bardi and Peruzzi families of Florence first formed banks. For centuries, banks have borrowed and lent money to businesses, trade and to people, charging interest on loans and paying interest on deposits. In the 13th and 14th centuries, Italian banks even financed England and France in the 100-year war. That both those borrowers failed is another matter.

At least in terms of perception, banking is probably as 'old economy' a business as you can get. Then why does the headline for this column say what it does? Isn't telecommunications as 'new economy' as banking is old. For the connection, read on.

But first a quick look at the flurry of activity from India's new telecom players. Big and serious players like Reliance, Hutch, Bharti, and Idea, are (or will be) rolling out their services across India. Reliance has ambitious plans to connect 115 cities and offer the gamut of telecom services -- basic and cellular, voice, data, Internet, et al. Its peers in the game have similar plans. For many of them, like Reliance, telecom will be the first time they will try their hand at what is primarily a services business, aimed at fulfiling the needs of customers in large numbers. Thus far, Reliance has operated in markets, like energy and petrochemicals, where its customers have been a few large buyers of what are essentially commodities. As a telco, Reliance Infocomm will have millions of retail customers as its focal point.

It isn't surprising then that companies like Reliance or the other new telcos are scrambling for talent in the job market. At a conservative estimate, there could be 20,000 new jobs that would have to be filled at the new telcos over the next 12 months. Predictably, the hunt for people is focused on consumer product companies, like marketers of fast moving consumer goods (FMCGs), traditionally known to be the repositories of marketing and brand building talent. A marketing giant like Hindustan Lever, thus, becomes a natural target for telcos and their headhunters trying to fill up jobs. Reliance alone, according to reports, has been hiring-or at least targeting -- hundreds from FMCG companies, including Lever.

Curiously, not too many telcos are targeting banks for talent. Banks? Yes. Here's the connection. Take telecom. Telcos deal with customers that are always on the other end of a telephone, be it a wireless cellular handset or a plain old wired basic phoneset. Once a customer buys from a telecom service provider she stays with it in a relationship that's quite different from, say, buying toothpaste from an FMCG marketer or a television set from a purveyor of consumer electronics. Nurturing or servicing a telco's customers can, therefore, be very different from servicing a VCR buyer or trying to hook a customer on to a shampoo brand that she keeps coming back for.

Now look at banks and their relationship with their customers. Once a customer signs up for a credit card, a car loan, a mortgage or a checking or savings account, she stays with the bank for a relatively long period. And is always on the other end of a credit (or debit) line. It is this 'always online' nature of the customer-marketer relationship that could be the common strand between banking and telcos. And, precisely, the reason why the new economy's telecom majors should look to bankers for a leg up. True, telcos will need to hire engineers and technical staff but for their front-end services, where marketing and customer relations are the key result areas, shouldn't telcos like Reliance target banks instead of consumer product marketers?

-SANJOY NARAYAN