With WiLL likely to blow a hole in their bottomlines, cellular operators are weighing a range of options from shutting shop to joining the basic bandwagon.

By Suveen K. Sinha

It may look like he's taking a swipe at this scribe, but Rajeev Chandrashekhar the 35-year-old CEO of BPL's Innovision Group is serious: ''The option before me will be to shut shop and maybe get into publishing a business magazine... The entire $2 billion invested in the cellular industry will go down the tube.''

Sunil Bharti Mittal, the CEO of the Bharti Group, isn't that despondent. ''GSM will be the only choice for those who want to offer mobility... Once the outgoing tariff on GSM comes down to Rs 2 a minute and CPP (the Calling Party Pays principle, which makes incoming calls free) is in place, you're home.''

BPL and Bharti are the two biggest telco groups in the country, its CEOs are among corporate India's young Turks, and the two normally see eye-to-eye (some members of the pink brigade, India's financial dailies, have ventured far enough to suggest a merger of the two). And, here, both were responding to the same question: if the telecom dispute settlement appellate tribunal allows Fixed Service Providers (FSPs) to provide mobility using Wireless in Local Loop (will), at fixed-service rates that are far lower than cellular ones, what can Cellular Service Providers (CSPs) do to face the competition?

The Fixed-Cellular Divide

The Cellular Operators Association of India (COAI) has moved the tribunal against the decision. Even as the next hearing is slated for March 21, 2001, there are whispers of a settlement being worked out between the government and CSPs. Most CSPs-they won't be quoted on a matter before the courts-echo Chandrashekhar's sentiments off-record such as: ''Anyone who wishes to offer mobility, must apply for and obtain a mobile licence in keeping with the policies laid down in NTP (New Telecom Policy) 1999.'' The other option-finding a way to provide a level playing field, which now appears uneven on the grounds of the entry-fee-and-interconnection-charge regime in which CSPs operate-wasn't articulated, but it was there. Put simply, FSPs pay lower licence fees and interconnect agreements-they'll retain 60 per cent of domestic long-distance call revenue, for instance, while CSPs do 5 per cent-seem loaded in their favour. Worse, for every one-minute call made from a cellular phone to a fixed phone, the cellular operator has to pay Rs 1.20 to the fixed-line operator. Which means a cellular operator cannot fight will on price even if it charged nothing for airtime. And nine out of 10 calls made to or from cellular phones are from and to fixed ones.

But Mittal has reason to believe CSPs will survive. ''GSM will remain the predominant mobile technology. wiLL will merely form a layer between fixed and mobile.'' Sure enough, while targeting a pan-Indian cellular operation, the man has bid for eight basic circles to go with Bharti's Madhya Pradesh operation, the first private fixed-line service to go on stream in June, 1998.

No one knows the exact expanse of the Short Distance Calling Area (SDCA) to which a will handset will be tied. A metro circle, for instance, will be one SDCA. In states, one city is to be one SDCA, but no one knows how air waves can be controlled to ensure that the will coverage in, say, Hoshiarpur doesn't also cover adjacent Gurdaspur. ''The definition of SDCA will be crucial. If the SDCA is not increased, the low will tariff cannot be sustained beyond the marketing phase,'' says Deepak Kapoor, Head of technology practice at Pricewaterhouse Coopers. That will hurt.

Mittal says mobile operators can score over will by providing value-added services like SMS and WAP. Then there is roaming. But Chandrashekhar doesn't agree: ''They (FSPs with will) can do everything that cellular guys do with a much lower cost structure.'' Points out a CSP's CEO: ''First, 95 per cent of my revenue is voice. Second, 90 per cent of my subscribers don't travel out of the SDCA. And third, why would anyone want SMS if she can talk for the same duration at half the cost?''

Fixed-Cellular Convergence

Mittal's yet another prescription is that CSPs must get into fixed line as well. Kapoor is confident that fixed and mobile convergence will happen at a rapid pace post-will. It seems to be happening already-102 of the 120 fresh FSP applications have come from CSPs-but some cellular companies are loath to realign their strategy because of what they consider an unfair regulatory twist. Nevertheless, companies that do not have the option of pulling out of the country may well be forced to expand their presence across the telecom spectrum. Life will become increasingly difficult for stand-alone CSPs as their rivals achieve economies of scale. And telecom M&A, which had died out in India after Birla-AT&T-Tata's acquisition of RPG's Madhya Pradesh cellular licence, could rear its head again. Says Kapoor: ''Single mobile operators will be squeezed by those armed with fixed-mobile convergence and will have no option but to sell.''

The tribunal's decision will decide things one way or another. Till then, FSPs may find it difficult to tie up funding since the tribunal has said that all licences being issued will be subject to its order and, therefore, third-party rights cannot be created. The issue of SDCA and whether there is such a thing as limited mobility will also become clearer after BSNL's will service commences by the middle of the month. In the meantime, yet another confusion ensures that India remains a none-too-comfortable destination for global telecom investors.

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