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Monday, June 16, 2003

Cellphone industry ‘on brink of collapse’

CELLULAR industry is on the brink of financial sickness with the accumulated losses over Rs 7,100 crore mainly due to government’s policy of allowing basic operators to offer WLL (mobile) services, says Cellular Operators Association of India.

"The grave financial situation of the cellular industry is evident from the mounting accumulated losses, which are increasing year on year, completely belying the impression created by the surging subscriber base. Accumulated losses for the industry as of end-December 2002 were around Rs 7,100 crore," COAI said in a letter to Telecom Secretary, Vinod Vaish.

The recent sharp drop in cellular mobile tariffs are completely unsustainable, COAI said adding that "this unsustainable level has come only because of the industry’s attempt to combat unfair competition from WLL (M) services."

Asking the Department of Telecommunication (DoT) and the Telecom Commission to carry out independent financial investigations to know the financial health of cellular industry, COAI said that government must come out with a stable policy and balancing industry growth on sound commercial fundamentals to attract investments, while ensuring consumer interest.

The impact of the present financial situation is that the industry was no longer able to generate the funds required for increased capital expenditure to service its growing subscriber base and provide service at specified "Quality of Service" levels to cellular consumers, T V Ramachandran, Director General of COAI said in the letter.

Ramachandran said the cellular industry was serving more than 13 million subscribers in around 1,649 cities and towns through an investment of over Rs 25,000 crore.

He said the decision to permit WLL (M) operators to enter and offer cellular mobile services without a proper cellular license, coupled with the regulatory advantages that have been conferred on WLL (M) operators, has made it possible for them to offer extremely low tariffs.

"The cellular operators, in an attempt to prevent the churn of their subscriber base, have been compelled to match these tariffs even while being bound by the terms and conditions of a disadvantageous regulatory regime vis-a-vis WLL (M)," COAI said.

"We believe that the industry is now entering a critically dangerous phase where it is on one hand seeing promising growth by making telephony artificially affordable to millions of consumers, while on the other it is facing financial sickness due to the unsustainable environment where policy and regulation, and not market forces are forcing it to become unviable in order to remain competitive," COAI said.

Ramachandran said the accumulated losses could be much high from a level of Rs 7,100 crore which excluded data of Koshika Telecom and Reliance.