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So what if it was the year of cellular services? Basic services too performed well in FY 2002–03, thanks to the large-scale uptake of WLL (M) by subscribers and expansion of services in new geographies by private service providers. Limited mobility gave a new lease of life to basic services, which looked attractive again.

Market Size
In terms of revenues, the basic services market for FY 2002–03 was estimated at Rs 28,908.37 crore, an increase of Rs 2,398.08 crore from Rs 26,510.29 crore in the previous fiscal. The segment has done well in terms of revenues, registering around 9 percent growth as compared to a growth of 4.06 percent in the previous fiscal.

However, the incumbent operators, BSNL and MTNL, had to take a beating. Their market share (in revenue terms) dipped by 2.5 percent. In FY 2001–02, the duo had held around 97.4 percent of the market share, which dropped to 94.9 percent this fiscal. In revenue terms, BSNL and MTNL together mopped up around Rs 27,427.68 crore. Private operators fared significantly better, contributing around Rs 1,480.69 crore to the overall pie. Thus, they nearly doubled their revenues from Rs 680.4 crore in FY 2001–02.

Tata Group, in particular, performed pretty well among the private operators and led the tally with revenues of Rs 609.48 crore. Bharti Group came second, with around Rs 354.90 crore while Reliance managed to occupy the third spot with revenues of Rs 316.31 crore. Since Reliance Infocomm service was not commercial in the last fiscal, the revenues represent only the subscription revenues that the company collected through different schemes. HFCL Infotel and Shyam Telelink came next, respectively.

Top Basic Service Providers (in Revenue terms)
Rank	Companies	Turnover (in Rs Cr)		Growth (in %age)
		FY 2002–03	FY 2001–02
1	BSNL	21,570.00	19,481.69	10.71
2	MTNL	5,857.68	6,348.20	-7.72
3	Tata Teleservices (Mah)	369.64	252.5	46.39
4	Bharti Telenet	354.9	162	119.07
5	Reliance Infocomm*	316.31	NA	—
6	Tata Teleservices	239.84	149.9	60
7	HFCL Infotel	140	80	75
8	Shyam Telelink	60	36	66.66
	Total	28,908.37	26,510.29	9.04
* Includes Reliance Telecom (Gujarat) circle and 17 circles of Reliance Infocomm, as merger of Reliance Telecom (Gujarat) with Reliance Infocomm has been proposed NA: Not available

The top three private groups contributed 4.4 percent to the overall basic services revenue. However, in subscriber terms, things were slightly different. The top three groups made up for around 4.5 percent of the pie. Reliance Group (Reliance Telecom and Reliance Infocomm) has overtaken others and leads the private operators block with a market share of around 2.2 percent, followed by Tata Group at 1.4 percent and Bharti Group at 0.9 percent. Reliance Infocomm did well on account of WLL (M), which allowed it to add subscribers at a faster pace in comparison to landline subscribers. The company is yet to launch its fixed line service, which is expected to happen in the third quarter of FY 2003–04.

Top Basic Service Providers (in subscriber terms)
Rank	Companies	No of Subscribers		Net Addition	Growth (in %age)
		FY 2002–03	FY 2001–02
1	BSNL	35,932,877	33,415,197	2,517,680	7.53
2	MTNL	4,690,080	4,542,928	147,152	3.23
3	Reliance Infocomm	958,534	Nil	958,534
4	Bharti Telenet	371,973	160,000	211,973	132.48
5	Tata Tele	365,190	150,000	215,190	143.46
6	Tata Tele (Mah)	233,397	159,500	73,897	46.33
7	HFCL Infotel	111,000	65,000	46,000	70.76
8	Shyam Tele	82,265	30,000	52,265	174.21
	Total	42,745,316	38,522,625	4,222,691	10.96
V&D estimates CyberMedia Research

In terms of subscriber base, the incumbent operators still commanded 95 percent share, a reduction of 3.55 percent from FY 2001–02. They had a subscriber base of 40.6 million. Private operators had 2.12 million subscribers, of which 45.2 percent went to Reliance Group. Overall, there was an addition of around 4.22 million lines, moving the subscriber base to 42,745,316 in FY 2002–03. The figure is on a higher side, considering that in FY 2001–02 there was an addition of around 3.85 million lines. This fiscal, basic services witnessed a growth of around 11 percent in subscriber terms, a drop of 7 percent from FY 2001–02.

If one looks at the overall basic telephony base in the country, the fixed line component works out to be 95 percent. The remaining five percent is divided between fixed wireless terminal and WLL (M). Out of the total base of 42.74 million lines in the country, wireline is 40.74 million lines, WLL (M) 1.77 million lines, and FWT 0.22 million lines. This fiscal, one can see exceptionally good growth in WLL (M) as both Reliance and Tata are very aggressively pushing WLL (M) in their respective circles. Even, on the incumbent front, MTNL is pushing WLL (M) with an aggressive price structure whereas BSNL is still banking more on full mobility rather than on limited mobility.

The Catalyst
With WLL (M), it is now becoming easier for service providers to roll out services at a faster pace as they don’t need to dig roads to lay cables but can give the connection and then activate the phone at the earliest. This has helped them increase tele-density in their respective circles from 3.03 in FY 2001–02 to 4.22 in FY 2002–03. The country is well set to achieve the NTP ’99 targets of seven by 2005 and 15 by 2010.

With the acquisition cost of WLL (M) decreasing day by day, the demand for WLL (M) is also increasing. At present, the WLL (M) acquisition cost is even less than that of the fixed line and this will act as a catalyst in achieving the above numbers.

Services were launched in new geographies, and customers had the option to opt for private operators. The waiting list got cleared and subscriber numbers swelled. Tata expanded its service in Karnataka, Tamil Nadu, and Gujarat. With the acquisition of Hughes Tele.com, the company is planning to launch WLL (M) services in the state. In the first year of its rollout, the company plans to cover 18 SDCAs in three states.

Reliance Infocomm has already commercialized its services in 92 cities and plans are on to cover 686 towns and cities through an OFC network of 60,000 rkm.

During the fiscal 2002–03, Bharti launched services in Tamil Nadu and Karnataka, and increased its FSP circles from three to five.

Bharti launched its basic services in Tamil Nadu and Karnataka in the month of April. In Tamil Nadu, Bharti launched services in Chennai, Madurai, Coimbatore, Tirupur, Vellore, and Pondicherry. In Karnataka, the company launched services in Bangalore, Mangalore, and Mysore. Plans are there to launch services in Manipal, Udupi, Hubli, and Belgaum.

HFCL Infotel and Shyam Telelink also reached out to new towns and cities in Punjab and Rajasthan respectively. Currently, HFCL Infotel caters to 23 town and cities.

The Players
It was a year of expansion for basic services companies like Tata, Bharti, and Reliance, which commenced operations in new geographies. In terms of number of circles, the country witnessed the launch of services by private operators in 23 circles. This has led to an increase in overall circles from eight to 31 circles, resulting in an increase of around 287 percent in terms of operational circles. The much-hyped Reliance Infocomm project finally took off with its network launch on 27 December, 2002. The company finally commercially launched its service in 17 circles, plus Gujarat, from 1 May 2003. In FY 2002–03, Bharti launched its services in Gujarat, Karnataka and Tamil Nadu. Tata expanded its basic telephony service from Andhra Pradesh and launched services in Delhi, Karnataka, and Tamil Nadu.

Reliance Infocomm: In the third quarter of FY 2003–04, the company is planing for ‘enterprise netway’ revolution by providing 100 Mbps Ethernet links to every desktop. The company is planning to connect half a million enterprises. It also has plans for providing high-speed Ethernet links to 80 million homes and will help provide convergence solutions like TV channels, high-speed telephony, audio conferencing, videoconferencing and video on demand.

Tata Teleservices (Maharashtra): In December, Tata Teleservices acquired Hughes Tele.com and gained a foothold in the lucrative Maharashtra circle. Since the company was under the acquisition phase, it registered 46 percent growth in both subscriber base and revenue terms.

HFCL Infotel: In the last fiscal, the company has added around 46,000 subscribers located in around 23 cities. In terms of subscriber break-up, it has around 67,000 fixed line, 12,000 fixed wireless, 32,000 WLL (M) customers, and around 6,000 Internet subscribers. On the corporate front, the company has around 261 customers.

Last year, the company invested around Rs 200 crore in infrastructure and plans to invest around Rs 250 crore this financial year.

Bharti Infotel: The company has shown a three-digit growth and more than doubled its subscribers from a base of 160,000 in FY 2001–02. As on 31 March 2003, Bharti had a subscriber base of 371,973. The fixed line business accounted for revenues of Rs 354.9 crore, of which Madhya Pradesh contributed around 56 percent i.e. around Rs 198.6 crore. The rest was contributed by new circles comprising Delhi, Haryana, Tamil Nadu, and Karnataka. Bharti’s strategy is to focus on corporate and high revenue generating customers.

In Tamil Nadu, the network comprises one main switching unit (MSU), six remote switching units (RSUs), and nine digital loop carriers (DLCs). In terms of infrastructure deployment, the company has laid more than 1,154 km of OFC and plans to lay 589 km of copper. The Karnataka network consists of one MSU, seven RSUs, and 16 DLCs. In terms of infrastructure, Bharti has laid more than 400 km of OFC and plans to lay another 100 km of OFC and 1,500 km of copper in the state.

In Delhi, the services are currently available in South Delhi and some parts of central Delhi. In Haryana, the company has increased its reach from Gurgaon and Faridabad to Ambala, Panipat, and Karnal. In Madhya Pradesh, it has done pretty well and launched services in 20 cities.

Forecast
It is very difficult to estimate the market for FY 2003–04 as basic telephony is dependent on a lot many factors. All the factors like IUC, TTO, sales tax, do play an important role in pushing the tele-density and also the revenue of basic service providers in the country.

In FY 2003-04, TRAI has introduced regulation on interconnect usage charges, thereby laying the foundation of a level playing field. The IUC regime introduces a new revenue stream for mobile service providers in form of termination charges. For the first time, fixed line and WLL (M) service providers will start giving termination charges to mobile operators for the use of mobile network for terminating calls on their network. IUC has been implemented from Ist May 2003.

Simultaneously TRAI has implemented new Telecommunication Tariff Order, 1999 whereby monthly rentals have increased and free and discounted rate calls have reduced. In addition pulse duration of local calls has been revised downwards. Due to this customer has become very choosy and depending upon whoever provides the best offer both in basic and cellular, the customer is opting for the best so one can see a lot of churn happening in both basic and cellular.

In the WLL (M) case, the Supreme Court has set aside the order of TDSAT and has remanded back the matter to TDSAT for reconsideration with special emphasis on the question of level playing field. TDSAT has heard the case and the final decision is awaited soon. So, once the decision is out one has to revisit the forecast depending upon what impact the decision will make to basic services and how is it going to impact related segment like cellular services.

On the sales tax front, service providers are being asked by state governments to pay sales tax retrospectively, which is in addition to the 5 percent service tax paid by the service providers Service providers has moved Supreme Court against various state governments’ demand that telecom service providers should pay sales tax. The court has issued a show cause notice to all the governments, states, central and union territories, on BSNL’s plea seeking stay on imposition of sales tax.

Telecom companies already pay service tax, which is going to be raised to 8 per cent (from 5 per cent) as announced in the Budget and sales tax in the country varies from 4-12 per cent in various states. This can have a great impact on service providers.

If one considers all these factors it is forecasted that basics services will grow by around 8 to 10 percent in FY 2003-04.

Pravin Prashant