Mobile telephony: BSNL's entry hots up competition

CHENNAI NOV. 13. The cellular telephony market, already extremely competitive with the onset of the third player, will witness even more competition with the launch of BSNL's Cell One service across the country. Visulaising the emerging scenario seems to be a daunting task .Of special significance is the very attractive package announced by VSNL, initially valid for 90 days which leverages BSNL's enormous strengths in the fixed line segment .The public sector company plans to roll out Cell one in as many as 1000 towns and cities within the next one year.

What will this do the existing operators? According to CRISIL, the rating agency the immediate issue before mobile operators is not the threat of market share losses but the potential loss in revenues if, consequent on competition, there is an across the board lowering of tariff. However, it is expected that the mobile operators will wait until BSNL decides on its more permanent strategy after the initial 90-day offer is over.

Besides, there is for BSNL the key question of providing adequate service to match its aggressive tariffs. In particular its willingness not to charge incoming calls emanating from its own networks has been termed predatory by the existing players. But aggressive pricing alone will not help BSNL to overwhelm its competitors. In a business like this customer service is critical.

What ought to worry the existing players is the prospect of BSNL charging consistently lower, long after the expiry period of the initial offer. Citing the examples of Delhi and Mumbai markets, CRISIL points out that MTNL did not win in the numbers game (its share is around 10 per cent), but has been able to keep the air time charges from moving up. In fact the cellular tariff plans in those cities are at an unprecedented low levels. Over the medium term the benefits of competition will flow in to the existing players, through increased subscriber base. In the short run, cash flows are bound to be affected.

Already the entry of a third operator has radically changed the scenario. The new entrant has been one with established operations in some other circle. Competition has forced all players to offer free several services such as roaming. Also looming on the horizon is the threat of WLL-based services adding to the competitive pressures. BSNL itself is planning to rollout these.

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