Monday,
June 16, 2003 |
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Feature |
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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.
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