Beeped Out of Business

When did you last hear a beeper? Between the clicks of the mouse and the ring of the cell, everyone seems to have forgotten the beep of the pager. The first mobile communication system to hit the country (1995), the pager, rejected by the upper and middle classes in favour of the cellphone, is today fighting for survival. The subscriber base is an unimpressive 6,50,000, down from 8,00,000 in 1998. In contrast, cellphones have attracted close to three million subscribers.

So what went wrong? Paging service providers point their finger at the cellphone. To begin with, the price difference between the pager and the mobile has steadily narrowed. "When we started out, the monthly rental for a pager was Rs 150 and for a cellphone it was Rs 600. Today, cellphone rentals are Rs 475, while for paging it's Rs 300," reveals P.N. Uppal, secretary general, Indian Paging Services Association (ipsa). Paging operators complain that while generous government packages have allowed cellular service providers to bring tariffs down, the paging industry has been left high and dry.

Cellphone operators had 10-year licenses, but were allowed to migrate to revenue sharing after three years. In effect, this meant that from the fourth year onward, they were to pay the government about Rs 150 per month per subscriber instead of the earlier Rs 500. License fee arrears were calculated only up to August 1999. This was a tremendous boost—rentals came down even to Rs 200 in smaller towns. Call rates fell from the initial Rs 16 to about Rs 5 a minute. Paging operators too moved to revenue sharing after three years with five per cent of total revenues to be paid as license fee. But this did not bring much cheer—the operators' contention is that because of the immediate competition from cellphones, they were not able to build a subscriber base. Further, thanks to a trai financial feasibility study, they had to increase rentals to Rs 300 in 1999.

The result: while the cellular industry has been able to halve capital costs per subscriber from the original Rs 60,000, paging costs per subscriber still stands at the initial Rs 3,000. If volumes double, the figure can fall to Rs 2,500. "At the moment, two calls are made per day per pager and we can double that if rentals are brought down," says Dr Deepak Malhotra, ceo, Microwave Communications, which owns the Pagelink and Pagepoint brands. "And once the call rate is doubled, we can share this revenue 50:50 with the government." Pravin Kumar, managing director, dss Mobile Communications, which runs Mobilink, agrees. "World over, telephone companies pay pager companies because 60 per cent of all paging messages result in calls. mtnl can charge 2.40 per call and can give us 50 per cent."

The paging industry argues that if cellular operators with 10-year-licenses were allowed to move to revenue sharing after three years, paging operators with 3-year-licenses should be allowed to move to revenue sharing after the first year. And any license fee dues should be adjusted against the 5 per cent of revenue they have to pay the government. They have also asked for the revenue-sharing agreement to last just five years, after which they should not be obliged to pay anything to the government. But before that, there's a positioning problem to be solved. The pager subscriber is the self-employed businessman, the carpenter, or the salesman. But many of them stay away due to the price factor. Operators are then forced to sell a downmarket product to an upmarket customer. To do so, they have value-added the pager with options like e-mails, stock updates, round-the-clock news and roaming facilities. But all this hasn't helped. One reason is the pager's downmarket image and the other is price. "In the US, the average monthly cellphone bill is $25-30 while the paging bill is $4-5. It makes sense to keep both. In India, a cellphone bill in small towns is as little as Rs 600 while in the big cities it comes to Rs 900. This isn't much when compared to the paging rental of Rs 300," says Kumar.

The Rs 300-crore industry can hope to grow only if it's able to it sell itself as a mass communication tool. Service operators know that they have to tap the pyramid's large base and that can only happen with rock-bottom prices. Three players quit the fight last year—Motorola, Hutchison and Usha Martin. Even those around are yet to make money. The industry is, however, hopeful that the government will come out with a "revival package by next month" since the trai is due to send its recommendations in a week or so.

If the desired government sops come, the pagermen are hopeful of reaching the three-million subscriber mark in three years. If they don't, then the writing is on the wall.