Rediff Logo Infotech Banner Ads Find/Feedback/Site Index
February 24, 1998


Blah blah!

That's what all talk about the less than Rs 5,000 cell phone is.

Email this story to a friend.

The Cellular Operators' Association of India's much publicised programme to sell handsets at Rs 5,000 has come a cropper.

COAI had announced that cellular handsets would be available for less than Rs 5,000 because cellular operators were banding together to make bulk
Blah blah!
GES Tech targets India
Aptech bonus is 1:1
TCS, Mashbra tie up
purchases of the instruments and sell them cheap. This was an initiative to expand the market itself.

The scheme was to be launched in January. However, all cellular operators have now refused to buy the handsets through the COAI scheme.

COAI does not plan to introduce such schemes again. "You expect co-operation in such programmes, but none of the cellular service providers came forward to purchase under the scheme," a COAI official lamented.

Currently, the cheapest handset available in the country costs Rs 9,000. COAI had negotiated with a number of global handset manufacturer for bulk procurement at a lower cost and had selected Nokia's 1610.

The handsets were priced at Rs 4,585. The bid to reduce handset prices was aimed at tapping the higher segment of the lower middle class market in India.

T V Ramachandran, COAI's executive vice-president, had said "Currently operators feel costly cell phones have a status tag attached to them which has kept the market narrow.

"It is a major segment, which has not been fully tapped. But we expect to soon capture the lower and mid segment of the market," he said.

Industry observers said, in spite of the assurance given by all operators to buy the handsets from a vendor to be selected by COAI, it was predictable that they would refuse at some juncture.

"The game is not only about low air time but more subscribers, which means a cut on handset prices too. It is well known that not all operators have been able get their revenue and are racing to increase number of subscriber to get some revenue," industry observers pointed out.

According to a cellular operator in one of the metro's, "If we had accepted the COAI scheme all of us would have to provide same handset for the same price, which meant competition only through air time. No operator could have afforded to take the risk."

Ramachandran acknowledges this. "We may have an increase in gross revenue but not in air time usage."

DoT favours higher call charges, rentals

Meanwhile, the Department of Telecommunications is exploring new areas of revenue generation without dismantling its populist schemes.

In response to the Telecom Regulatory Authority of India's consultative paper on pricing, DoT has suggested higher local call charges and rentals for telephones installed on customer premises, though it believes that in view of the low telecom penetration such moves should be deferred for a few years.

DoT also wants a gradual reduction in the total number of free calls. DoT sources said that annually, they have been losing 2.65 per cent of their revenue due to free calls.

DoT is divided on the issue of free calls. A department officer had told TRAI that "populist measures do not send positive signals to the industry. Social concession can be reduced at least in metros and other industrial towns".

The number of free calls was reduced to 150 in 1960 from 275 in 1959, but it was increased to 250 in 1979 to be brought down to 200 in 1982. It was again raised to 275 in 1988, but scaled down to 150 to 1990.

A 1996-97 study by the Economic Research Unit of the department said that more revenue was secured after reducing the number of free calls in 1990.

"But this (the free calls) is still eating into DoTs revenue. An inter-department committee had also suggested doing away with free calls for second or third phones installed at the same premise. But no decision was taken although the suggestions did go to the concerned ministry," the sources added.

DoT also favours higher telephone rentals for business class subscribers, as opposed to residential subscribers. Removal of other sops like subsidies on STD/ISD, cross-subsidised local call charges, should be done away to improve the revenue, a department officer said.

- Compiled from the Indian media

Tell us what you think of this story