SHORT of targets by between 30 and 50 per cent, cellular phone service operators have launched a blizzard of special schemes and discounts to lure the cautious customer.
In Delhi, market leader AirTel is offering a free connection for your spouse: subscribe, and you get an add-on AirTel SIM card; an instant saving on security charges of Rs 3,000 and activation charges of Rs 1,260. Its rival, Essar Cellphone, has three handset models on offer, at prices subsidised upto 50 per cent, and this month, new subscribers will have to pay only Rs 315 for unlimited airtime. In Bombay, Hutchison Max is giving between Rs 6,000 and Rs 9,000 worth of airtime free on particular handset models. Its competitor, BPL, too, is offering special prices on handsets with gifts like cigarette lighter-cum-car chargers thrown in.
Laments Peter Stok, marketing director, Essar Cellphone: "The market has not taken off as everybody expected. Predictions of even Coopers & Lybrand and Arthur D. Little have proved wrong." In Delhi, where operators were expecting a subscriber tally of 50,000 by March 1996, actual cellphone users currently total around 34,000. And only 25,000 Bombay-ites sport mobiles against an expectation of 50,000. Within a few months of launch, BPL and Hutchison Max enrolled over 20,000 subscribers from the top of the consumer pyramid. Unfortunately, the rest of the pyramid has continued to ignore the benefits of going cellular.
The biggest barrier, say operators, has been the price of handsets, which come with a heavy customs duty of 72.5 per cent in India, compared to nil or marginal rates in the developed world. "We expected the government to reduce duties to 40 per cent," says a senior executive. "When that didn't happen, we thought the 1996-97 budget would reduce it to some extent. But thanks to the elections, and the vote-on-account instead of the annual budget, everything has been postponed further." Operators are now hoping for some duty cuts in the 1997-98 budget.
In the meantime, everyone seems to have adopted a two-pronged strategy: huge discounts and incentives on instruments to break into the middle executives and professionals market, and several complicated reduced tariff schemes to encourage more usage of the phone. The second part, at least, may be working. "From an average of 100 minutes a month initially," says a Hutchison Max representative, "an average cellphone owner is now using almost 300 minutes a month."
But before falling for the bait, the potential customer would be well advised to check out the fine print thoroughly. For example, of the three handsets that Essar is offering at slashed prices, two are bulky gadgets that won't fit into your hip pocket and will create an ugly bulge in your jacket pocket, negating the snob value and convenience of sleek. One of the models weighs a full 500 gm, and is being slowly phased out—after being vastly popular for years on construction sites in the developed world because of its ruggedness.
So, for an outright payment of Rs 9,000, or Rs 10,004 in 12 instalments, this gizmo will not pinch your wallet, but will give you only the very basic features of a cellphone. Most importantly, it has no calling line identification (CLI) which helps the subscriber to identify the incoming caller's number before accepting the call. This saves the cost of incoming calls by taking only the ones that you need, thus staving off unwanted callers. However, Stok claims that there are many takers for such functional handsets from small businessmen and traders, who constitute a major segment of the market in the country.
The potential customer should also note that the heavy discounts on initial airtime will not last forever. For, airtime charges are the cellphone operator's bread, butter and jam. For instance, AirTel first reduced airtime charges on incoming calls, pegging them at 40 per cent of outgoing calls. But from January 1, the rates were raised to 60 per cent. And from July 1, incoming calls will be charged 80 per cent of the outgoing ones, discloses N. Arjun, senior vice-president, AirTel.
But despite the disappointment, the market is optimistic. Says Arjun: "By March next year, Delhi alone will have 150,000 subscribers." Adds Stok: "The Delhi market will take off by the end of this calendar year, and will have between 80,000 and 100,000 subscribers." By March 1999, Delhi will boast of 300,000 subscribers, he predicts. Says B.V. Raman, executive director of Motorola's cellular subscriber division: "India could be one of the leading markets for cellular phones, once services pick up, which may be a year after start-up of operations."
Yes, not until operators first really reduce airtime charges (and not merely offer temporary sops) and the Union Government follows suit by slashing customs duties to bring cell phones within the reach of, at least, the middle-class.
