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|January 28, 1998||
Delhi's cellular companies break even at a time
Even as the rest of the cellular industry is making cash losses of about Rs 4 billion per month, Delhi cellular operators - Bharti Cellular and Sterling Cellular - have broken even.
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Both Bombay operators, until some weeks ago, were lagging behind their Delhi counterparts in terms of subscriber base. The cellular operators in Calcutta and Madras are also likely to break even late next financial year.
Bharti Cellular (which offers services under the Airtel brand) and Sterling Cellular (which uses the Essar Cellphone brand name) have been making about Rs 100 million monthly revenues.
Although the subscriber base is lower in Bombay, Hutchison Max and BPL Mobile have the advantage of higher airtime usage and revenues close to that recorded by the Delhi operators.
The breakeven point of a cellular project is a critical indicator of the financial health of the operator. It represents the stage when the project attains a degree of financial stability and is just short of generating net profits.
The breakeven stage is often referred to as a precursor to rewarding shareholders for their investments.
The breakeven stage of most cellular projects is predicted between the third and the sixth year of operations.
For instance, the operations of Birla-AT&T, the cellular licensee in Gujarat and Maharashtra, are expected to break even between the fourth and the fifth years.
Clearly, the metro cellular companies have managed to break even so early because they don't have the burden of licence fees.
In the first round of bidding for provision of cellular services in the metros, the Department of Telecommunications did not go in for an auction and instead mandated low, flat licence fees.
Delhi, for example, was given away at just Rs 20 million, Rs 40 million and Rs 80 million in the first three years of operation.
The licence fee set for Bombay was Rs 30 million, Rs 60 million and Rs 120 million for the same period.
This is expected to go up to an annual licence payout of Rs 5,000 per subscriber by the fourth year of operations.
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- Compiled from the Indian media