August 30, 2002 | 1714 IST
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Money > Business Headlines > Special August 30, 2002 | 1714 IST |
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The cellular arena: How do the gladiators standSalil Panchal/Morpheus Inc in Mumbai Part I: Cellular phone war hots up again India's cellular phone industry is one of the world's fastest growing markets, according to leading global research house, Gartner.
Gartner estimates the Indian cellphone market to expand at a compounded annual growth rate of 46-50 per cent over the next five years till 2006. According to industry figures, India's overall cellular subscribers on July 20, 2002, stood at 76.9 lakh (7.69 million) with more than a third - over 30 lakh (3 million) coming from the four main metros of Mumbai, Delhi, Kolkatta and Chennai. How strong are some key cellular players? BPL Mobile: A subsidiary of the BPL group and one of the leading players, BPL has more than 7,20,000 subscribers and is spread across 192 cities in the circles of Mumbai, Maharashtra, Kerala, Tamil Nadu, Pondicherry and Goa. A further growth in this segment is expected with the coming of the high-speed Mobile-Internet services through General Packet Radio Service that allows subscribers to connect directly to the Internet through their mobile phones. The parent company BPL Ltd has posted a net profit of Rs 2.36 crore (Rs 24 million) for the quarter ended June 30, 2002 compared to Rs 10.21 crore (Rs 102 million) for the quarter ended June 30, 2001. MTNL: Through its basic telephony network, it continues to be a dominant player in Delhi and Mumbai, where long distance calls originate. Its strength comes when it negotiates interconnect arrangements. Its cellular operations - Dolphin - not faring too well in Mumbai and Delhi, suffering in customer service. Analysts with equity research houses Goldman Sachs and SSKI now give MTNL a `market outperformer' investment rating, considering divestment takes place. MTNL declared disappointing results for Q1 FY03 ended this June 30, 2002. The company saw a 33.8 per cent dip in net profits to Rs 249.7 crore (Rs 2.50 billion) for the quarter ended June 30,2002 compared to Rs 377.2 crore (Rs 3.77 billion) for the same period in the previous fiscal. This was on the back of a marginal fall in net income from services - Rs 1,493.65 crore (Rs 14.94 billion) for the quarter ended June 30, 2002 compared to Rs 1,495.32 crore (Rs 14.95 billion) for last fiscal`s corresponding quarter. Bharti Tele-ventures: Steady financials and a nationwide presence make it a strong player. This will help the operating subsidiary - Bharti Cellular. Its licences have increased from 2 to 15 since 1999 and through various group brands Bharti touches 93 per cent of India's cellular customers in the post- fourth operator licence regime. Strong branding and the recent IPO have strengthened its position (the company raised $172 million). It has private equity investment from Singtel, Warburg Pincus and IFC Washington. Bharti Tele-ventures reported a sequential growth of 21 per cent in revenues, 29 per cent EBITDA and improved earnings. EBITDA margins have improved to 25.6 per cent in Q1FY2003 from 24.2 per cent in Q4FY2002. By the end of June 2002, Bharti Tele accounted for 22 per cent of total mobile subscribers in the country. Its strong points include marketing skills, stable national reach and value-add features.
The worries for BPL Mobile, MTNL and other players... Domestic PSUs like MTNL and Bharat Sanchar Nigam will have to work hard towards maintaining transparency and streamlining their customer services departments. MTNL has been operating its Dolphin services for over a year at the key metros but has failed to hit the leading players - BPL, Orange and Bharti - in a major way. These two players will have to capitalise on factors like good networking, huge nationwide reach and government backing. BPL Mobile, despite its stable subscriber base, has its major worry in the future of the Birla-Tata-AT&T combine (Idea Cellular) tie-up. A year after signing the MoU, the merger of BPL Mobile and Idea Cellular is still to take shape and has run into trouble due to legal wrangles faced by BPL. The merger would boost Idea's position in the cellular market as there would be access to the major Mumbai and Maharashtra market. Industry analysts say the merger has been called off and a fresh round of dialogues may commence later. In the case of the Orange brand of Hutchison Max, strong marketing skills have seen it narrow the gap with its arch rival BPL Mobile across most centres. Customers have however argued of poor frequencies in some of the metros. What will differentiate the players in the market? An ICRA study projects subscription to the telecom industry cellular services to grow by 80 per cent touching 1.15 crore (11 million) by March 2003. This would mean that mobile phones would account for 20.5 per cent of total telephone connections in India. Still the cellular density will remain low at 1.1 per cent compared to the fixed tele-density of 4.3 per cent. The Indian cellular operators, in their initial years, grew due to factors like demand and high margins. Over the past 4-5 years the scenario has changed completely. Today increased competition and declining prices - in terms of duties, tariff and mobile phone sets - has made the Indian cellular industry a low margins and high volume game. It must be said that "value added services" will no longer be the differential factor. Another key development is that while initial (fresh) subscriptions will always be seen in a new market, maintaining this segment will become a crucial issue. There are three key issues, which will become the focus for cellular operators whenever they penetrate a new market.
Cellular licenses/operators in India:
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It has drawn massive investment from private equity players and global telecom giants facing saturation in most western markets. There are around 6.9 million subscribers in India compared to 150 million users in China.