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CRISIL: With BSNL around, private cellular operators have nowhere to go

14-November-2002
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CRISIL: With BSNL around, private cellular operators have nowhere to go

The research agency CRISIL has stated that cellular players are going to experience a further loss in revenues as a result of state owned telecom major BSNL's aggressive strategy of providing cellular services at cheaper rates. Currently, the cellular operators are keeping a watch on the BSNL offerings before coming out with a counter strategic offer.

"BSNL's launch of Cell One and aggressive intention of rolling out four million lines in 1,000 cities in next one year has upped the ante with the immediate issue now faced by operators being, not threat of market share losses but the potential loss in revenues from an across the board lowering in tariff levels", CRISIL claimed.

The research agency further says that private cellular operators will be left with no choice in a situation if their tariffs are at an extreme disadvantage viz a viz BSNL. It will be interesting to see how the Tariff Regulatory Authority of India reacts as BSNL leverages its extensive networks and existing consumer base to sweep the cellular market.

The whole development is going to make an adverse impact on the cash flows of the cellular industry, with the increase in customer base or usage, given lower tariff levels, kicking in only in the medium term. "BSNL's tariffs, particularly free incoming calls from its own PSTN networks, have been termed 'predatory' by competition. Customers are unlikely to switch allegiance in significant numbers unless service levels match those offered by private players", CRISIL has pointed out.

It must be noted that within just over three weeks of launching its countrywide cellular services, BSNL's CellOne has registered nearly 100,000 subscribers. BSNL has invested close to Rs 2,500 crore for setting up its cellular infrastructure for 4 million GSM lines and plans to add another 3 million lines in the next one year. The company is targeting a market share of 50 per cent in the next two years.

CellOne had stormed into the market with an attractive tariff package of free incoming calls made from any of BSNL's 38 million fixed line phone for a monthly rental of Rs 325. BSNL subscribers also do not have to pay the initial security deposit for a CellOne connection even as other operators charge around Rs 1,000.

Despite such massive networking and aggressive marketing, BSNL has not been successful in the Kolkata circle because of poor quality of the service which could turn out to be the differentiating factor for the private cellular operators as mentioned by CRISIL.

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