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December 9, 1998


How to win friends and influence government:Private operators may withdraw HC petition that objects to MTNL's cellular telephony plans.

The last hurdle in the path of MTNL's plans to offer cellular services seems to be disappearing.

The Mahanagar Telephone Nigam Limited is the government owned basic telephony services provider in high teledensity metros of Bombay and New Delhi.

Email this story to a friend. When MTNL announced it would like to offer cellular services in the two metros, incumbent private operators moved the Delhi high court, petitioning against allowing another competitor into a market where companies are striving to make ends meet.

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The government's cellular licensing policy creates a 'duopoly' in a 'telecom circle'. Not more than two companies are licensed to operate in a given area. So, when MTNL announced confidently that it is going to be a third cellular service operator, petitions flew like a reflex.

Now a miracle has come to pass. The same petitioners are likely to withdraw their cases before it comes up for the next hearing on December 17.

Remember there are two rules about miracles. One. They do not happen. And two. If they do, they can always be explained.

This particular miracle follows a feedback from the government's Group on Telecom. The GoT, as it is affectionately called, holds a view that the government should delicense telecom services in the first place as part of a bailout package for the beleaguered cellular services industry.

External Affairs Minister Jaswant Singh heads the GoT. He is considering replacing the current licence fee regime with a revenue-sharing mechanism.

But that's what the cellular industry has been demanding all this while.

Well our GoT is granting them that but extracting its pound of flesh. To make up for the lost revenue, Singh's plans require that the current 'duopoly' practice be abolished and any number of cellular players be allowed to compete in a telecom circle.

Welcome MTNL.

Sources say the GoT rider does not leave many options for the cellular industry and it is most likely to sheath the sword it has been waving at MTNL.

MTNL will now be able to offer cellular services in New Delhi and Bombay in the second half of calendar 1999.

It had earlier planned to enter the cellular market by the end of this year but that had set the cat among the pigeons.

On February 17, the Telecom Regulatory Authority of India had barred MTNL from entering the cellular market.

The TRAI order, in turn, was negated on July 16 by a bench of the Delhi high court that supported the government through a Department of Telecommunications move to grant MTNL a cellular licence.

But some of those cases are still pending.

MTNL Chairman and Managing Director S Rajagopalan had initially said he would price his cellular service at Rs 2 a minute, a shockingly competitive position when compared to the average Rs 7-8 per minute that cellular operators normally charge.

Now MTNL is in the midst of shortlisting telecom vendors for purchasing switching equipment and radio base stations for its cellular networks in Delhi and Bombay.

Cellular equipment vendors like Ericsson, Motorola, Nokia, Alcatel, Siemens, Tata-Lucent Technologies and Nortel have been quoted among the lowest bidders in the world for the two-million-subscriber systems that MTNL wants to buy.

The MTNL deal for the entire gamut of equipment, including the exchange and radio base stations is expected to be the cheapest cellular deal struck in India.

A deal announced in June between Ericsson and Srinivas Cellcom, the cellular licensee in Tamil Nadu, has been, till now, the lowest priced deal estimated between $220 and $240 a subscriber over two years.

In its request for proposals, MTNL had asked cellular telecom vendors to quote prices for switching equipment and radio base stations of two-million-subscriber capacity by the fifth year of operations.

Initially, they are to supply equipment to support 100,000 subscribers in each city.

MTNL had initially planned to start cellular service in the two cities by end of 1998; a deadline that has been extended to March 1999.

The total market demand for cellular services in Bombay and New Delhi is estimated to be over Rs 26 billion annually by 2001.

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