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Indian cellular cos won't fight single licence

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CIOL Bureau
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NEW DELHI: India's cellular phone operators have decided not to fight a government decision to throw open the mobile sector to unlimited competition, but will press for more than $4 billion in compensation.

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In a move expected to see some companies go under, the cabinet decided to bring fixed line and mobile services under a single, unified licence to stoke growth in one of the world's fastest growing mobile markets.

Cellular operators, which have already invested more than $5 billion and lost almost $2 billion, will be worst hit.

"(But) we are not going to challenge the unified licence in the courts," Cellular Operators' Association of India chief T.V. Ramachandran told Reuters.

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"We are still debating what are the steps that we can take, but we'll fight it out in the marketplace. We believe we've been given a raw deal." Operators are slated to meet officials soon to discuss their previously floated compensation claims.

Analysts say the cabinet's decision has legitimised roaming services offered by the telecoms arm of India's biggest conglomerate, Reliance Industries Ltd, which cellular firms complained was illegal and eating into their business.

It also ended more than two years of legal bickering between fixed line players such as Reliance, fellow CDMA operator the Tata Group and the government on one side and the private GSM cellular sector, including major foreign players, on the other.

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But with substantially lower call and infrastructure costs for Reliance and Tata, their entry as full mobile service providers is expected to drive cellular losses higher and force some smaller players out of business altogether.

"Cellular companies would be needing compensation for them to have sustainable business operations," Kobita Desai, principal analyst at Gartner India Research, told Reuters.

Said another analyst: "There will be consolidation in the sector, but valuations for cellular firms have already taken a dive -- you don't have to be a rocket scientist to figure that out."

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"CDMA networks will come out in full bloom and their data capabilities are much better than GSM companies'. Only three or four companies are going to survive."

The leading GSM firms are Bharti Tele-Ventures Ltd, 16 percent owned by Singapore Telecommunications, state-run Bharat Sanchar Nigam Ltd, the Indian mobile unit of Hutchison Whampoa and Idea Cellular Ltd, equally owned by Tata, Birla Group and AT&T Wireless Services Inc.

They lead a dozen firms against six presently restricted to limited range CDMA mobile services -- touted as the "poor man's mobile" for India's billion-plus people when launched in 2001.

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India's potential is huge. About two million new customers are signing up every month, but only two percent of people have a mobile, compared with 19 in China and more than 60 in Europe.

India wants to increase the number of mobile users from 24 million, less than a tenth of China's, to 100 million by 2005.

Until the cabinet's decision, based on a proposal by the telecoms regulator, firms had to buy separate licences for each service.

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In 2001 fixed line firms were allowed to offer limited mobility within a local call area, such as a city, by offering wireless connections over the "last mile".

But Reliance began taking on cellular operators by "forwarding" calls to its customers when they travelled, effectively giving them full roaming.

Although Reliance will have to pay a fine and extra fees totalling $350 million under the cabinet ruling it is effectively buying into today's booming market at yesterday's prices.

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The cabinet's move came just days after the regulator's proposal -- a record in a country where decisions can take years.

"It's not sending the right signal to foreign investors, because it's seen as legalising an illegal service by paying a fine," said an analyst. "These foreign players will have to dig deeper into their pockets and also go in for more efficiencies."

© Reuters

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