BUSINESS

Cellular operators see growth prospects

MUMBAI, DEC. 24. The cellular industry has largely welcomed the announcement made by the Telecommunication Ministry regarding the relief for the cellular operators. The Cellular Operators Association of India (COAI), which had filed a case in the Supreme Court against the government decision allowing the CDMA phone operators to continue to offer their services, has withdrawn its case following the financial package announced for the industry.

"We are greatly encouraged by the announcement; we have been working for the last several weeks in this direction and now the industry can move forward and expand the market,'' T. V. Ramachandran, Secretary General, COAI, told The Hindu.

According to an industry observer, "It is generally good for everyone. This puts a lid on the old history of litigation and now the newer operators can come in and offer value added services to customers without being encumbered by any litigation.''

The prolonged status quo was obviously not good for the customers or the operators. "Hopefully, now all that is behind us. From a total subscriber base of around 11 million in calendar 2002, we are going to see 28 million by December end this year (22 million GSM subscribers and 6 million CDMA). In two years, we are looking at a total of 100 million,'' said Mr. Ramachandran.

Although the CDMA players were not involved in the litigation, the 2 per cent reduction in revenue share is applicable to all and players such as the Tatas and Reliance would also enjoy its benefits. They already enjoy the benefits of full mobility.

"The 2 per cent reduction in the revenue share to be paid will definitely give a boost to the industry. We should now see good growth. The reduction in the revenue share means that now operators in A Circles would shell out only 10 per cent instead of 12, in B Circles 8 per cent instead of 10 and in C circles 6 per cent instead of 8 per cent. There is also a lower cap of 5 per cent for RSA,'' said the industry source.

The announcement regarding a possible hike in foreign direct investment is welcome as it will be good for those companies planning to list their stock on the bourses. In fact, to begin with, many had planned to come out with public issues.

However, some operators are sceptical. "The relief of 2 per cent is to all operators — on the one side there is a penalty and on other side they are giving a relief. They have excluded metros and included only the circles — a critical issue — because so much has been already spent on metros — in promotions. So, in effect, the last mover has the advantage. Their logic is that the earlier players paid less licence fees, but that does not hold good. We were expecting something more substantial,'' said another leading industry player.

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