Tribunal decision to shape telecom sector structure: analysts

It's an eye for an eye in the telecom industry.

Days after Reliance Infocomm announced its almost 'dream-like' tariff structure, cellular companies have joined hands to counter the competition.

From the midnight of Thursday, cell firms decided to charge a uniform mobile-to-mobile STD rate of Rs 2.99 per minute, irrespective of distance and time.

Telecommunication and IT Minister Pramod Mahajan, who made the announcement, may have called the move a ‘death of distance and time' and promised many more such concessions on a weekly basis, but telecom analysts in the country prefer not to get carried away by the euphoria for two reasons.

Reason 1: The Telecom Dispute Settlement Appellate Tribunal.

With the ongoing differences between the cellular service providers and the fixed line telephony firms offering limited mobile services (wireless in local loop), and the Supreme Court's refusal to grant a stay on the expansion of WLL services, analysts say the structure of the telecom industry is still dependent on this critical tribunal decision.

Says Chetan Saigal, director (research) India, Templeton Asset Management, "The clarity of the level playing field is still to emerge. Only after the decision, we will know who the winners and losers are."

Saigal asserts that as of today, it is still not clear if interconnect between CDMA (code division multiple access) and cellular is a legitimate service.

The tribunal's decision is expected in three to six months.

Reason 2: Quality may suffer.

Even though some analysts are of the view that with improved technology, quality will not be compromised, Mahesh Uppal, director, Telecommunications and Computer Information Systems (an independent consultancy specializing in regulation and policy), is of the view that the consumer often loses out when there are price-cuts.

"All the money that would otherwise go in setting up networks will now go in undercutting the competitor," feels Uppal.

Another Mumbai-based analyst who did not want to be named felt that since the cash flows will be impacted, complete justice might not be done to upgradation of networks.

With this announcement by cellular operators, analysts say it makes the job for Reliance Infocomm much more challenging.

Since Reliance has already generated a wave of excitement among consumers with their tariff structure, analysts expect that major consumer decisions will be taken in the weeks to come.

Many consumers are now looking at WLL as a cheaper substitute to cell phone companies and analysts say players will leave no stone unturned while trying to go after each other's consumers.

All in all, the consumer is expected to be inundated with more and more exciting offers. In this 'landmark' period for the Indian telecom industry, one will also see a fair amount of controversies, analysts warn.