Who's ‘Genie’ is it going to be in Mumbai?

Rahul Gupta

MUMBAI: Will Reliance’s Genie be the coup de grace for GSM operators in the country? While the market is agog with rumors of Reliance’s proposed launch on December 28, it has already caused enough panic among the beleaguered cellular operators. While everyone is waiting for the big day when reliance would unleash its CDMA services with tariffs which are eye popping.

Though the proposed tariff plan is yet to be approved by TRAI, one thing is for sure --- The stage is set for a battle royale between the GSM operators on one hand and Reliance on the other, both on technology and pricing front. Reliance has already made its intentions clear that it is going to take on the combined strength of cell companies on pricing after proclaiming that this is going to be the cheapest telecom services in the country.

Although, India boasts of the lowest cellular tariffs in the world, but it is nowhere near what Reliance has to offer. While the jury is still out, the debate on CDMA vs. GSM is raging on as to which is the better technology, cheapest services offering doesn’t mean it could be a success driver on the technology front also. MTNL ‘Garuda’ is a perfect example for that.

Though price could be a differentiator in the short run, it is obviously the range of services that is going to separate boys from men. For common man on street, technology doesn’t mean anything. Services do. Though the matter is now sub-judice, with both sides engaged in a fierce battle, GSM operators in the country are putting a brave face. "CDMA doesn't offer anything that GSM doesn't already have," pointed out Deepak Varma, President and COO, BPL Mobile. The big challenge for GSM would be adding more value-added services, which will shore up the falling voice revenues and ride on the popularity of applications like SMS.

Since the charges for CDMA lines are not yet fixed, Reliance would offer landline at less than the cost of what BSNL offers. The company is also planning to bring in schemes to attract customers who are using mobile phones but hardly get out of the city. Other than northeastern states and Jammu and Kashmir, the company has licenses for 18 circles to launch its wireless service. Also over 40,000 km out of the planned 60,000 km of optic fiber cables is in place and the company proposes to offer basic, national and international long distance services.

To attract subscribers, the company is likely to launch the CDMA handsets between Rs 3,000 and Rs 10,000. The company is in deals with Samsung and LG for import of these handsets. To beat the distribution strength of GSM operators, Reliance has put all his hopes on its 700 odd webstores, most of them would be on its own petrol pumps which are coming-up shortly all across the country.

These webstores would primarily sell company’s products and services. These webstores would consist of customer-convenience center, cafeteria and a broadband center. The next big game plan of the company is its retailing. The company has hired around 10,000 executives with FMCG background to retail its products.

These executives are not on the pay roll of the company and would be paid on the commission basis. While lack of experience in retail is often quoted as Achilles’ heel of retail, the proposed web stores are expected to be the direct interface with customers. But a caveat: "Telecom doesn’t work on the FMCG model," cautioned Sanjay Sharma of Ericsson.

The company which has plans to invest to Rs 25,000 crore over five years is currently in the third year of its implementation plan and about 60 percent of the investments have been made.

Though Reliance seems to have won half the battler even before entering the fray, the global mobile telephony scenario should be more than encouraging for the GSM operators. In terms of sheer numbers, CDMA has picked up only three million subscribers in the US and eight million more in rest of the world, compared to 120 million users of GSM worldwide.

Worldwide, the Cellular Operator Association is expecting 55 percent penetration over the next five years - seven years. In India the wireless market is growing at the rate of 80 percent. Also practical matters like infrastructure costs, capital expenditures and roaming capabilities means that chipmakers and electronics vendors can't ignore GSM technology.

As far as the technological advantage is concerned, GSM operators have an upper hand. GSM is still better than CDMA in the network protocol area. According to experts, GSM has challenges, but it doesn't have a death march at all. Worldwide, both are going to coexist.

And it would be relatively transparent to the consumer. Overall, GSM is more complete, tighter and more specified, but from a spectral efficiency point of view CDMA is a very attractive way to go. If one moves to 3G technology in GSM, one has to opt for a new system and a completely new spectrum -- that is the biggest disadvantage GSM operators have right now.

Though much has been heard about CDMA, particularly since some large carriers opted for the technology and Reliance would have an upper hand in semi-urban and rural areas, it would be wrong to write off GSM.