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February 10, 1998


Paging service providers haggle over fee structure

Email this story to a friend. The Indian Paging Service Association has requested the Department of Telecommunications to spread the licence fee for state paging (excluding the capital) over 10 years and link it to revenue generated.

According to Brigadier Shemsher Khan, chief executive, Punwire, the IPSA has formed a subcommittee to negotiate with DoT on the state paging licence fee payment structure.

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"At present, operators are required to pay an equal amount of fee annually over 10 years. We are requesting DoT to go easy on licensee fee payment in the first five years and recover the balance in the subsequent five years."

Currently, three operators - Hutchinson Max Telecom, Punwire and BPL Wireless Telecommunications Services - are offering state paging services.

Hutchinson Max is operating in Punjab. BPL Wireless has commenced operations in Kerala, Tamil Nadu and Karnataka. Punwire has obtained licences for 12 states - Punjab, Himachal Pradesh, Haryana, Uttar Pradesh, Rajasthan, Madhya Pradesh, Gujarat, Maharashtra, Andhra Pradesh, Karnataka, Kerala and Tamil Nadu.

Hutchinson Max has to pay Rs 32 million annually as licence fee for Punjab. BPL needs to pay Rs 25 million per annum for Kerala and Rs 45 million for Karnataka. Punwire's fee for the 12 states totals to Rs 400 million per annum.

M P Ramakutty Nair, general manager and head of BPL Wireless' Paging Project, has said the market is in a very nascent stage.

"With subscriber levels for state paging operators still being abysmal, the question now is that of affordability," he added.

According to Sandip Das, chief executive, Hutchinson Max Telecom, to pay the specified Rs 32 million licence fee to the DoT, the company has to have a subscriber base of 11,000.

"Barring Chandigarh, Ludhiana and Jalandhar, the other towns in Punjab do not have a population of over 100,000. This makes it difficult for us to pay the required fee from the start," he claimed.

Also, because of poor infrastructure service operators are not able to save costs in the setting up of their networks.

According to Das, a centralised network with automated operations through the hiring of leased lines of the DoT is not a workable proposition as leased lines are unreliable.

"While on the one hand we find it difficult to hire professional manpower to work in semi-urban areas, on the other hand we are not able to control overheads on manpower due to lack of centralised network," he complained.

However, all operators are not for a reduction in the licence fee. The point raised is only for deferment of licence fee. "Ideally, the DoT needs to look at either linking the fee structure to the revenue generated by operators or go by the subscriber base each operator has," Das has said.

Nair too subscribes to this view. "DoT could have licensee fee payment linked to an operator's turnover." According to him, restructuring of fee payment is not only in the commercial interest of operators but also a social responsibility of the government because paging technology will help better penetration of telecommunications.

"India has a very poor basic telephone penetration in semi-urban areas. Paging could develop into a cost effective and economical option. For this market to grow, the DoT needs to look at fee restructuring so that operators can offer pagers at reasonable prices."

Meanwhile, the IPSA, faced with a severe financial crunch, is planning to move the Telecom Regulatory Authority of India for a 50 per cent hike in paging subscription fee from the present level of Rs 250 to Rs 375 (for alphanumeric pagers).

One of the main reasons for seeking the hike is the continuous loss most operators are incurring. Industry sources say losses in the paging industry exceed Rs 7 billion. The cost of acquiring a subscriber is still high and therefore some companies offer heavy discounts - aggravating their financial troubles.

Though the IPSA is keen on taking up the issue with the TRAI, industry observers feel that the outcome may not be in the interest of developing the paging market. Some recall that when the subscription rate was increased from Rs 150 to RS 250, one year ago, there was resistance among subscribers and it created a slump.

A 50 per cent hike now may lead to a sizeable chunk of inactive subscribers, they fear.

The contention is that the paging industry should not be compared with the cellular industry on the tariff platform. Ultimately, the target customer, the middle class, should be borne in mind before arriving at a decision on the tariff hike.

The other option, according to Nair, is that while the upper ceiling of subscription fee could be Rs 375, operators should be allowed to be flexible within this ceiling. "Though this would also lead to undercutting, it may not be a long term phenomenon considering that survival is difficult."

- Compiled from the Indian media

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