NEW DELHI, India-India is set to witness an explosion in wireless services during the next few months, with the decision to end the duopoly of GSM operators and to allow fixed telephony companies to offer “limited mobility” services using wireless technology.
Two more cellular operators soon will be inducted in all of the four metro and 22 state circles. Thus, each telecom circle, or service area, will have four cellular operators-two existing private GSM 900 MHz operators, one government carrier and a new private operator offering GSM 1800 MHz service.
The Department of Telecom (DoT) has already issued a “technology neutral” license to two government fixed-line companies-MTNL for operating in the metro circles of New Delhi and Mumbai and BSNL for operating in the other two metros, Chennai and Calcutta, and all of the state circles.
Technology-neutral licenses give the new government carriers the freedom to offer any kind of cellular service. MTNL has opted for GSM at 900 MHz, while BSNL may go for a mix of technologies in different circles.
The fourth operator in each circle will be a private company and will offer GSM 1800 MHz service. “Allocation of a separate frequency spectrum for the fourth operator will ensure that the service quality of the existing providers is not impacted adversely as a result of the addition of one more operator,” the Telecom Regulatory Authority of India (TRAI) said, while recommending the new spectrum on 24 October.
“The cellular market is expanding, and time is now ripe for enhanced competition, which will improve the quality, pricing and variety of services available to the public,” the regulator observed.
DoT shares this optimism.
“Cellular companies are adding 0.15 million subscribers every month. Networks are getting choked. So, clearly there is room for more. The challenge before operators is who grows fast enough,” said Shyamal Ghosh, Telecom Commission chairman and DoT secretary, in an interview.
The tender process
The fourth player will be selected through an auction, with a prequalification by the DoT. The bidding will start at the end of November, and licenses may be issued in the first quarter of 2001. Besides an entry fee, new operators will share 17 percent of their revenue with DoT, as decided by TRAI earlier this year for all cellular licensees.
The DoT will qualify prospective bidders on the basis of certain eligibility criteria, like financial strength and rollout plans. “Earlier people just picked up licenses and then started looking for funds. We want to avoid such conditions now, so that licenses can be issued quickly and players start rolling out fast,” noted Ghosh.
At first glance, it appears the number of operators will double. But in actual terms, operator numbers may increase only marginally, as most of the existing players will vie for additional licenses in different circles. Bharti Cellular-a leading cellular and fixed provider-is planning to bid for the Mumbai license. Others are also firming up their plans.
All of the country’s big players are likely to bid for new licenses, as they all want to operate in contiguous circles or become multiservice operators. The state-owned long-distance company, VSNL, announced its intentions to bid for new cellular licenses in the four metros. The move is part of the company’s strategy to diversify into new areas before its monopoly on international long-distance ends in 2002.
“We want healthy competition in all circles. At the same time, we expect the consolidation to continue, and we will encourage this trend. But we will not allow two licenses to merge in one circle, meaning the number of players in a circle would continue to be four. One player can operate in two or more circles and take over others. We will also allow addition of fresh equity,” said Ghosh.
Rajan Mittal, joint managing director, Bharti Enterprises, said the entry of new players will lead to certain price correction and greater competition, but at the end of the day, the market will expand. “Existing players will have a lead over others, and the consolidation game will continue,” Mittal said.
“New players could put competitive pressure on the existing players,” observed an executive at another leading operator. “Therefore, the government will need to demonstrate flexibility in the terms and conditions to ensure that viability of players, at least in the short to medium run. At the same time, a level playing field is necessary to ensure a competition-savvy regime.”
Existing players also want an early resolution of issues like calling party pays and a level playing field vis-a-vis basic operators providing limited mobile services. DoT announced in October fixed-line operators can now offer limited mobility services (see related story on page XX).
