It's an ambitious move to spread the telecom revolution throughout the country. State-owned Bharat Sanchar Nigam Ltd is tying up with the Indian Railways to install a string of cell towers along the country's main railway tracks.

Putting up cell towers along the railway lines will serve a dual purpose. Passengers will be able to talk at length during boring rail journeys. Also, towns and villages near the tracks will be linked to BSNL's swiftly spreading cellphone network.

That isn't the only move by BSNL to reach out across India. It's also about to build cellphone towers on major highways. It's already in 1,000 towns and cities and by year-end that figure should rise to 1,400.

"Seventy per cent of our new subscribers have come from market expansion. We have penetrated into new markets and in SEC B and SEC C segments where no one else has thought of going," says Anil Jain, deputy director-general, BSNL.

But as BSNL reaches out to new customers, other cellphone companies are switching strategies and plugging in to the swiftly changing realities of the marketplace.

They are slashing prices and looking for new ways to reach lower income groups. Says Manoj Kohli, the recently appointed president mobility, Bharti Telecom: "Our target is to offer mobile phones at the cost of a fixed line and make it into a mass product."

Kohli is matching words with action. Bharti has slashed the price of its pre-paid starters packs from Rs 300 to Rs 250. And it has thrown in free air time for users of its entry-level post-paid card.

The company is now trumpeting its new, cheaper prices in a newly launched advertising blitz aimed at smaller cities and towns.

The fact is that times have changed and all cellphone companies are being forced to react. Buoyed by the fact that all incoming calls will become free from May 1, (that's been a key barrier to expanding the market), GSM cellular companies are sharpening their marketing arsenals to transform mobile services into a mass-market, affordable product.

So what aces do the cellcos have up their sleeves to expand the market? For one, mobile companies are reducing entry barriers by slashing entry-level prices. They are also creating niche packages addressing the segments which couldn't afford mobile phones before.

They are also moving aggressively into smaller cities and towns and tapping new customers. Says Sanjay Mehta, director, Ernst & Young: "We are witnessing the penetration of mobile services to the lower end of the mass market as companies bring new social strata into the fold."

Leading the way is BSNL which, after launching in October 2002, has already picked up 2.3 million customers. BSNL is trying to execute a three-pronged strategy to outmanoeuvre rivals.

It is expanding to smaller towns and backing that with a strong distribution system that includes 3,000 customer centres and 900 independent dealers.

Also, it's using aggressive pricing to woo low-income customers: its pre-paid card at Rs 200 is cheaper than other competitors. And executives say they'll drop prices further if forced to by competition. That's not all.

It's also offering better deals for customers: it will soon offer pre-paid card users national instead of zonal roaming and talks are on to introduce international roaming very soon.

But the BSNL expansion drive is, of course, under threat from private cell operators who want to tap the same market. Bharti for instance is planning to expand its presence from 800 to 1,200 cities by the end of this financial year.

And it's working on doubling its distribution network. Says Kohli: "We are already strong in SEC A and B markets, now we are penetrating deeper into SEC C and D segments where the customer base is much larger."

Keeping them company is Hutchison-Essar which has so far concentrated its attention on the metros. Hutch is now planning to increase its coverage in the Andhra Pradesh and Karnataka circles from 25 cities to around 70 by year end.

Says a senior Hutch executive: "We will not have coverage in as many places as BSNL has because we have to look at the viability of the project. We need at least 500 to 1,000 subscribers to enter a new city or town."

Hutch is also playing the price game to take on BSNL. It has slashed prices of its starter pre-paid cards from Rs 300 to Rs 250 so it can take on BSNL.

It has also decided to waive deposits for post-paid customers who have a BSNL or an MTNL fixed line connection at home. That's the same as the BSNL offer.

Says a Hutch executive: "If BSNL can use their fixed line as a collateral for their customers asking for a mobile phone it is okay with us too. This will reduce entry costs substantially."

But why are cell companies suddenly pushing their services into the mass market, especially at a time when average revenue per user is expected to fall -- at least in the short run -- because incoming calls will be free?

Says Hemant Sachdev, director, Bharti Group: "Cellphone penetration per household has already reached 60 per cent to 70 per cent in the metros. So further growth has to come from smaller cities and towns, especially as the market is expected to grow from 12 million to 20 million by the end of the year."

That's one reason. The other is the BSNL juggernaut. The company has already grabbed over 73 per cent of the new subscribers who came into the GSM fold last month.

Competitors say that most of the new subscribers have come from the smaller cities and towns and also from the lower end of the income strata.

Says a senior cellphone executive: "In many of these cities we do not even have a network. BSNL and Reliance have virtually turned the airtime business into a commodity business where price is the only key factor. So we have to take on the challenge."

Reliance has already started operations in 75 cities and hopes to be in as many as 673 cities and towns in a few months.

Concedes a senior marketing head of a cellphone company: "The 40 paise STD tariff has caught the imagination of the small and medium enterprises segment and it's a large market of over 5 lakh units."

The cell companies also realise that they must segment the market if they want to woo a large number of new customers.

Bharti, for instance, has launched a pre-paid card for Rs 3,000 valid for a year to woo back the SME segment. And now as much as 20 per cent of its pre-paid cell cards are in this category.

Meanwhile, BPL is moving even more innovatively to discover new customers. It's offering packages catering to different groups. For instance, it is reaching out to fishermen in Kerala and traders in Tamil Nadu, who are offered commodity rates on their mobiles.

They are even targeting customers who have relatives in the Gulf with special offers. BPL has special low rates for international long distance calls to the region on Fridays, which is a holiday there.

Says F B Cardoso, CEO, BPL Mobile: "The whole idea is to identify segments and offer them value which others do not offer."

The battle will become even more brutal in coming months as the limited mobility players also launch into it aggressively.

But, with most operators expanding their reach at hectic speeds, the smaller cities and towns will become the new battleground of the cellphone wars.