The Indian cellular subscriber base has gone up by 90 percent during the last financial year. This is an encouraging trend that is expected to continue through the near future.

Voice is and will remain the killer application for quite sometime as far as the Indian cellular market is concerned. The incumbent cellular operators in India still regard voice as the most prominent source of their income, which accounts for more than 90 percent of their total revenue.

Will this trend continue to push the voice usage and increased voice ARPU? Well, there are considerable risks for both incumbents and the market if voice revenue are eroded in the price war. This is most likely to be initiated by a new entrant business {eg. Fourth (4th) cell operator }, whose market penetration strategy depends on data revenues (because data services have four key objectives- reducing churn, generating revenue, achieving differentiation and building market share), and the acquisition of customers attracted by low voice tariffs. Discounts between 15 percent and 30 percent for traditional applications like voice, basic VAS (voice mail, call forwarding, etc) maybe provided by the new entrant at market entry. Other applications may be priced at the market level. It is unlikely that an incumbent would instigate such a strategy because voice revenues will be too important to their existing business model.

However, it is entirely possible that a new arrival will force such a pattern on the market. This would transform current ARPU projections and have a significant impact on existing business models. The entry of MTNL in metros like Mumbai and Delhi, has already caused airtime rates to come down substantially. In fact price war has already begun with cellular operators both in metros and circles, bringing down their airtime rates significantly, in order to increase and save their existing subscriber base. Fixed service providers through limited mobility (if allowed ) coupled with a rate of Rs 1.20 per 3 minutes, will further bring tariffs down. While lower tariffs will tend to increase voice usage, this effect will not result in a net increase of revenue due to increasing inelasticity of the market in the longer run when the penetration has reached a reasonable level. Apart from this, the declining voice ARPU will definitely impact the business models of both the existing and new entrants in the cellular field. Factors like interconnection charges, revenue sharing regime, spectrum fee charges, declining airtime rates per minute and, possibly, the inability on the part of the vendors to bring down the prices of the equipment supplied by them to any significant level (unless the volumes ordered are large enough) as their profit margins are already under strain, may instigate operators to start thinking of innovative product differentiation and aggressive marketing strategies, to make their businesses viable.