In November this year, in the midst of a slowing Indian economy, over 750,000 Indians walked to their nearest shop and bought new mobile phone connections, thus fuelling a telecom boom the country has never witnessed before.

This was the highest number of new phone connections ever bought in the country — even surpassing the growth of landline phones.

And now that number is set to touch unprecedented heights. On December 28, under the brand name of Reliance India Mobile, India’s largest corporate, Reliance Industries, is scheduled to launch its Code Division Multiple Access (CDMA) technology-based Wireless in Local Loop (WLL) phones — better known as the poor man’s mobile — which could bring down mobile phone bills by half and even compete with landline phone bills.

The launch will kick off from Chorwad, where the late patriarch of the Reliance empire, Dhirubhai Ambani, went to school (He was born in nearby Kukaswada).

The launch will be preceded by a live teleconference between six Chief Ministers — Narendra Modi, Sheila Dixit, Vilasrao Deshmukh, Chandrababu Naidu, Digvijay Singh and S.M. Krishna — on December 27, in the presence of IT Minister Pramod Mahajan at the Dhirubhai Ambani Knowledge Centre, the headquarters of the Reliance infocom initiative, in Mumbai.

Reliance’s WLL launch comes at a time when India’s $ 1-billion mobile phone market already offers some of the cheapest tariffs in the world (cellular tariffs have dropped by over 90 per cent since May 1999). As of November 2002, India has 9.73 million mobile phone subscribers (see chart), a growth of 86 per cent over last November. With a 400-million strong middle-class, India has the potential to become one of the biggest mobile phone markets in the world, after China which has notched up 200 million mobile customers already.

For the Common Man

SAYS Mukesh Ambani, chairman of Reliance Industries: ‘‘My father and founder chairman of Reliance, Dhirubhai Ambani, had a dream — to put the power of information and communications in the hands of common people at an affordable cost. That, he believed, would help them overcome the handicaps of illiteracy and lack of mobility.’’

  In Gujarat alone, Reliance has sunk in over Rs 3,000 crore for laying a 2,500-km state-of-the-art optic fibre cable network. It is creating a similar optic fibre backbone across 18 states  

That dream was partially realised on April 14 this year — a date indelibly etched in the memories of all those involved with Reliance Infocom’s Rs 25,000-crore telecom project, undoubtedly one of the most ambitious and audacious projects ever to be conceived in the country’s communications arena. For it was on this day that a historic dial-up call made from the modest Ahmedabad office of the country’s fastest growing corporate to the Reliance Refinery Limited headquarters in Jamnagar, a bare 350 km away, set the tone and tenor of the country’s telecommunications future.

Dhirubhai, assisted by elder son Mukesh, presided over the first ever video conference between the Reliance offices of Jamnagar and Ahmedabad. It was the moment when Reliance Infocom’s project was actually born, midwifed by the man who almost single-handedly shaped the birth of Reliance Industries some 30 years ago.

Reveals a top Reliance Infocom executive: ‘‘It was a historic moment for all of us and Dhirubhai was visibly delighted at the quality and clarity of the video conference which indicated the efficacy of the fibre optic network that we have installed. He was lavish in his compliments.’’ The quiet in-house birth of the Reliance Infocom project was to be followed by a formal launch ‘‘somewhere in September’’. The plans, however, went awry following the tragic demise of Dhirubhai. ‘‘On Dhirubhai’s birth anniversary on December 28th this year, we will launch a major initiative to translate his dream into reality. Beginning with the villages of Gujarat, this infocom revolution will sweep the country and cover thousands of villages and hundreds of cities across the country next year,’’ says Mukesh.

Price War

LEAVING no steps unturned to realise Dhirubhai’s dream, Reliance is planning a WLL tariff package of just 60 paise for three minutes (see tariff chart) which, promises a Reliance insiders, would turn all tariffs of the telecom industry ‘‘upside down’’.

Existing WLL service providers like Tata Teleservices in AP, HFCL in Punjab and BSNL in Chennai offer free incoming calls and Rs 1.20 for a three-minute outgoing call. Similarly, MTNL’s ‘Garuda’-branded WLL phone costs the same in Mumbai and Delhi. Mobile phone operators charge an average of Rs 3.10 for a three-minute call for both incoming and outgoing calls. The Ambanis’ cheaper package for consumers stems from their optimism about the Indian cellular phone market, which is expected to soar to 120 million by 2008. Almost all players in the telecom industry, including the likes of the Tatas, Birlas, Airtel and multinationals like Hutchison, are reworking their pricing strategy to take on Reliance.

‘‘You can expect mobile phone companies to slash their prices by January first week,’’ says a telecom analyst. Experts agree that WLL could have a major impact on mobile operators’ revenues as most of the lower-end consumers will shift to the cheaper alternative. In fact, to prevent WLL phones being launched, Cellular Operators Association of India (COAI), an umbrella organisation lobbying for cellphone companies’ interests, even moved the Supreme Court. But the apex court disagreed.

Mobile phone operators are now putting on a brave front. ‘‘The only impact of the WLL launch will be that it will force mobile operators to cut prices further. We can go down in stages to Rs 1.99 for three minutes from a current average of Rs 3.10,’’ says Sunil Mittal, chairman of the Bharti group, India’s largest cellphone operator in the country. ‘‘Price cuts would not much affect average revenue per user (ARPU) — a key measure of a mobile operator’s performance — because volumes are rising and people are talking longer,’’ he adds.

‘‘Our prices have come down 35 per cent in the last few months, but ARPUs have only come down by around 10 per cent because people speak more,’’ he says, adding, ‘‘currently our ARPU is Rs 900-1,000 a month. It may come down to Rs 800-900 in two years.’’

‘‘WLL will pick up customers from fixed line consumers. There is a class developing between mobile and fixed line,’’ he claims. ‘‘More and more people want connectivity at all times, which only a cellular phone can provide and not a WLL phone which would stop the minute you are out of service areas. It’s like stopping your car or a scooter at a border and not going further.’’

The Battle of WiLLs

IN Gujarat, the state of Dhirubhai’s birth, after the recently concluded battle of the ballot, the battlelines are now clearly drawn in the telecom arena. Overtly though, competition is unfazed. Tata Teleservices, which ushered in its WLL services in Gujarat barely 10 days back, is seemingly unperturbed by the challenge that Reliance will undoubtedly pose as is public-sector juggernaut BSNL which commenced its WLL operations more than a year ago.

Says Jagrut Vyas, Chief Operating Officer of Tata Teleservices and the man in charge of Gujarat operations: ‘‘The market is big enough for everyone. You must also remember that we have made our plans for the market only after understanding it fully and keeping in mind the players we’ll be pitted against as well.’’

But with an investment of around Rs 1,000 crore on developing the network in the state however, Tata’s expenditure projections seem like chickenfeed compared to Reliance which is planning to pump in upwards of Rs 160 crore on advertisement expenditure alone and has already sunk in upwards of Rs 3,000 crore in laying a 2,500 km state-of-the-art optic fibre cable network in Gujarat.

Further, unlike Reliance which is not only creating its optic fibre backbone across 18 states of the country but has, in fact, created enormous surplus capacity by laying down eight pairs of rainbow-hued ducts which is double its requirement, Tata seems ill-prepared by comparison and is actually buying network off-the-shelf from cellular operators like Fascel in Gujarat. ‘‘What’s the harm in that,’’ queries Vyas, ‘‘as long as we have a network in place.’’ Dismissing criticism that even in its network, Tata has compromised on quality and used copper cables, Vyas claims that for the last mile, the final connection from network to phone has to be of copper.

That Tata is not unduly concerned with Reliance’s entry is also evident from the fact that whereas Reliance is set to use almost every marketing gimmick to ensure the success of their services — including pawning old cellular sets for new CDMA sets — Tata is not planning any such thing for the moment. While the company is offering CDMA handsets for around Rs 7,500 to subscribers, it’s not part of a package deal like Reliance, which is coming out with mouth-watering packages designed to woo even the most die-hard GSM (cellular) subscriber.

Says Vyas, ‘‘I’m sure we’ll also come up with buyback schemes some time later. The question at the moment, however, is, do I need it right now? I don’t think so considering that my target is just 1 lakh subscribers over 12 months.’’

From the Boardroom

Though Reliance is not officially disclosing its strategy, insiders say it is working on a package in which 800 minutes of airtime would be sold at the price of 0.05 paise for 15-second pulse. With a rental of Rs 240 per month plus another Rs 160 as talk time charge, it would be the cheapest mobile phone ever offered in India. Reliance has also tied up with ICICI Bank to finance the handsets which would cost Rs 1,500 for a basic handset to Rs 15,000 for a colour LCD display handset. The financing scheme (which will be around Rs 24,400) will account for the cost of a WLL handset (Rs 10,000) and airtime for three years.

The company is also planning to offer national long distance calling (popularly knows as STD), ISD and high speed internet connections to consumers in 2003. It plans 800 webstores offering broadband and telecom services. ‘‘When a call originates from a Reliance network, it will be carried anywhere in the world in the network itself. It does not need not to touch any present network of either BSNL or VSNL,’’ reveals a Reliance official. ‘‘This would obviously mean that the cost of the call would be lower, the benefit of which could be passed on to the consumer.’’ Analysts say the result will be that the prices of all calls including STD, ISD offered by other networks will also come down, even as low as 20 paise per minute.

In order to poach consumers from other networks, Reliance is also planning to offer an exchange scheme under which existing handsets can be exchanged for airtime coupons.

While the launch will certainly affect mobile phone companies, it also has the potential of taking away customers from the landline phone operators. ‘‘I am sure consumers would prefer to use a phone which can be used in a 50-kilometre radius instead of tying the phone to a table at home,’’ says telecom analyst N. Krishnan.

WLL or GSM

By offering limited mobility as stipulated by the telecom regulator, the Telecom Regulatory Authority of India (TRAI), WLL operators like Reliance would face a big handicap while taking on mobile phone operators. ‘‘Though technologically even WLL can offer unlimited mobility, this problem can be solved by switching off the WLL phone and switching on again which would connect to another base station,’’ says a Qualcomm official, the supplier of WLL technology to Reliance.

While it is the consumer who will decide ultimately, operators are enthusiastic about the potential success of CDMA, or WLL as it is popularly known, despite the fact that the BSNL foray has been a total failure due to poor quality and virtually no connectivity.

‘‘That,’’ says Vyas, ‘‘is largely because BSNL has put up a mere four or five sites to cover the whole of Ahmedabad. The result is that the coverage is poor. In our case, as in the case of Reliance as well, we’ve put up 25-30 towers each which will ensure quality coverage. We plan to increase the towers subsequently as this will enhance capacity as well, apart from ensuring quality services even when traffic volumes increase.’’

CDMA operators maintain that technology-wise, CDMA can do whatever GSM can, and more. For instance, CDMA enables optimum utilisation of the spectrum and is capable of giving better coverage and reach with fewer dropped calls. In terms of economies of scale too, CDMA has a cutting edge, with Tata Teleservices COO maintaining that it would be at least 86 per cent cheaper than comparative GSM services. On the flip side, though, limited mobility as defined by TRAI today, does not permit roaming outside the SDCA (short distance charging area) and neither does it permit services.

But as Asim Ghosh of Hutchison pointed out at a recent function hosted here to re-christen Fascel, the cellular service provider for Gujarat, as the countrywide Hutch brand: ‘‘There are six telecom operators in the US of which one has its own technology, three have opted for GSM and only two for CDMA.’’

Observes Vyas, ‘‘My hunch is that both the technologies would converge and both would be permitted.’’

In the coming months, the Indian telecom industry will obviously reverberate with the Reliance launch of WLL phones. And for the consumers — who have been neglected, shunned and even put on long waiting lists by previous operators, especially by government-run companies — it heralds the beginning of a new era. They will not only be king, they will be God.