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Trai move shakes up Indian mobile phone market

Cellphone service providers in India, one of the world's fastest growing markets, have been dealt a serious blow, observers said on Friday, by a regulatory decision to slash the fees for a rival limited mobility service.

The Telecom Regulatory Authority of India announced on Thursday that fixed-line service providers would now charge a basic fee of just Rs 200 ($4.10) for a competing mobile phone service called Wireless in Local Loop.

The previous amount laid down was Rs 450-550, and the new price compares to Rs 295 per month charged by Orange, a cellphone unit of Hong Kong-based Hutchison Whampoa.

Telecom analysts said the change was certain to boost WLL subscriptions at the expense of the 13 groups now providing cellphone services in India, where plummeting costs are expected to attract many more subscribers this decade.

"New subscribers will definitely go for WLL," said Sanjeev Prasad, a telecom analyst with Mumbai-based Kotak Securities.

Referring to the hundreds of thousands of new subscribers who sign up each month for prepaid services offered by cellphone operators, Prasad added: "Just about everybody will opt for WLL."

Outgoing calls for WLL phones cost just 0.40 paise per minute and incoming calls are free. Cellphone operators charge at least Rs 2 a minute for calls made and received.

For years the cellphone industry fought the introduction of WLL, arguing the government's stance on this made a mockery of the competitive terms under which cellphone operators paid hefty sums for licences.

They claim the government reneged on promises by now allowing fixed-line service operators -- all the giants are government-owned -- to offer cellphone service in all but name.

Technologically, WLL is identical to a cellphone service. The only difference is that the signal range is restricted -- by government decree, not the technology itself -- to a 25 km radius.

"There's no roaming with WLL, but the service area encompasses most of Mumbai and India's other cities," said Prasad.

Kobita Desai, a Mumbai-based telecom analyst with Gartner, agreed that the Trai decree would "definitely impact the cellphone market," particularly in big cities.

"The 25-km limit is not a problem in cities like Mumbai and Delhi. By and large it covers the whole area."

But Kobita said cellphones might remain the preferred choice in small towns and cities.

"Businessmen in those areas often travel widely around the region, so the restricted range of WLL becomes a problem.

"Also, most cell operators charge a flat rate for all calls made within a circle (huge service area). WLL subscribers would need to pay (much higher) national long-distance rates to make calls beyond 25 kilometres."

In recent months the fastest rates of subscriber growth have occurred outside the big cities, though from much smaller bases.

WINNERS AND LOSERS

The new Trai-set basic rate could spur the fortunes of the five fixed-line operators which now offer WLL.

These include Bharat Sanchar Nigam Ltd and Mahanagar Telephone Nigam Ltd, state-run giants that until last year were the monopoly providers of basic phone services in their respective areas.

The other three are new entrants Tata Teleservices, part of the Tata business group, Shyam Telecom and a unit of Himachal Futuristic Communications Ltd.

India's biggest business group, Reliance, is investing $5 billion to become a fully integrated telecommunications service provider, and plans to offer WLL through the nationwide fixed-line phone network it is building.

The three biggest cellphone service providers in India are New Delhi-based Bharti Tele-Ventures Ltd, Hutchison Whampoa's Indian unit and unlisted Idea Cellular Ltd, owned jointly by US giant AT&T Wireless, the Tata group and India's Birla conglomerate.

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