NEW DELHI, India–India, one of the fastest-growing wireless markets in the Asia Pacific region, is set for a churn. But it is unable to decide which way it will go–toward GSM or CDMA or perhaps both.
The battle lines are clearly drawn between full mobility GSM players and “limited mobility” wireless local loop (WLL) players using CDMA technology. After street fights that involved blocking access to each others’ networks and a conciliatory bid by Arun Shourie, the new communications minister, the matter is once again before the telecom appellate body.
The bone of contention is what constitutes limited mobility. The WLL companies hold basic telephony licenses and are barred from providing services like roaming and short message service (SMS), although the CDMA technology they are using is capable of these services. If they are allowed to offer these services, there would be no difference between their offerings and those of GSM companies. GSM companies have paid high entry costs in terms of license fees, spectrum charges and other levies and continue to pay higher levies under revenue sharing with the government than that fixed for WLL players.
The problem was magnified when Reliance Infocomm, a basic service provider holding a national license, started advertising its service as having all the features of full mobility, including roaming. It tried to overcome the regulatory ban on roaming by providing customers multiple registrations in different telecom areas.
“I don’t think the thin regulatory line dividing GSM and CDMA can hold for long, nor it should. The consumers should never be deprived of any facility or service. It should happen like the US, Korea and Singapore where both technologies are peacefully existing with their entire range of services,” said Parijat Chakraborty, head of telecom and end-user research at IDC (India) Limited, a Gurgaon, India-based research firm.
Telecom services analysts at UBS Warburg believe the government may change the rules for WLL service, making it more like full mobility services by allowing roaming. In exchange, it is likely that limited mobility players may be required to pay additional license fees and full mobility operators may have to pay lower fees and may be granted additional spectrum.
“At the end of the day we believe there will likely be little difference between these service offerings,” pointed out Susanta Mazumdar, a UBS analyst based in Mumbai.
The delay in resolution to disputed issues has led to a slow start to WLL services. Based on checks with local distributors and financing agents, UBS’ telecom experts believe Reliance had booked between 500,000 and 1 million subscribers by the last week of February, fewer than media reports of 2 million subscribers. Overall growth of CDMA limited mobility subscribers this year is expected to be 4 million to 4.5 million, below earlier stated projections of 7 million for Reliance alone. Now Reliance said it hopes to book 4 to 5 million subscribers during the next six months.
There have been no reports of a churn from GSM in favor of CDMA, as feared in GSM industry circles earlier. The GSM subscriber base in India has grown to close to 12 million.
“Not too many existing mobile subscribers are going for WLL today, the cost of handsets and lack of clarity of WLL offerings being the prime reasons. However, one may rightly say that it is going to take the wind away from GSM players’ sails as they would find it difficult to grow because a high share of new subscribers are favoring WLL,” pointed out Chakraborty.
Apparently individual subscriptions to Reliance’s service have been minimal so far, while most subscriptions have come from corporate entities with large sales and distribution workforces, according to UBS analysts. They also believe that a large number of Reliance’s 30,000 to 40,000 dealers are dissatisfied with the new operator’s commission structure as they have to sign up at least 25 limited mobility users before they receive commissions from Reliance.
From a service pricing perspective, Reliance’s limited mobility offering has stiff competition from full mobility GSM operator Bharti’s pricing plans. Bharti’s 1,000 rupees (US$21) monthly scheme appears competitive for medium users given that the operator offers real roaming and a 20-percent discount on international long-distance service. For heavy users, Bharti’s 1,700 rupees (US$35.70) monthly plan compares favorably with Reliance’s pricing structure as well.
“While price is going to be a key driver in the Indian wireless markets, other factors like network service quality, marketing and customer care, and package design and innovation are also going to influence this market a lot,” said Chakraborty.
Availability of handsets is also going to be a significant factor. Currently, Reliance is bundling LG handsets with its service. It has also signed up with Samsung, but these handsets are yet to reach distribution channels. LG and Samsung are projected to ship more than 3 million units into the Indian market in the first quarter of 2003. This could result in excess handset inventory if subscriptions with Reliance, Tata Teleservices and the other regional CDMA operators don’t pick up during the next few weeks. GW
