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: The National Long Distance (NLD) market is expected to see heightened activity with private telecom players expected to enter the fray even as Bharat Sanchar Nigam Ltd (BSNL) readies for war with aggressive price cuts. Over the next few months the entire process of private participation is expected to crystallise.
The NLD sector is at a critical juncture with sharp price cuts and increased volumes. The real test for telecom companies is yet to come, according to Kishor Chaukar, managing director, Tata Industries, who says: “The NLD market is based on a critical assumption and the question to be answered is how long it will take for the increase in usage minutes to compensate for the drop in revenue.”
The NLD segment entails a Rs 100 crore entry fee besides a bank guarantee of Rs 400 crore. “The high entry fee will work well since it will avoid clutter in the market,” says Chandan Ghosh, director (south Asia), BT Global Carrier Service.
The NLD market in India is today valued at approximately Rs 12,000 crore. Like the dynamics in any other market, a price drop is expected to increase usage.
This gains significance since it is believed that traffic has not increased substantially after BSNL recently announced its tariff cuts. Argues a telecom analyst with a research firm: “It will take a while for price and usage to balance out, especially when the price cuts are as large as 60 per cent.”
Ghosh, however, points out that traffic has actually increased by 40 per cent. “The future looks optimistic and the issue is to get the subscriber to use the NLD service more,” he adds.
One thing is amply clear - the NLD segment is likely to see quite a few players falling by the wayside because of their inability to increase investments. Explains Mr Chaukar: “It is essentially an issue of how much time and costs the players are willing to invest to balance out usage and revenue.”
The private players at this stage are Reliance and Bharti besides the Tatas. In fact, the Tatas by virtue of acquiring a 25 per cent stake in VSNL also have a free NLD licence. “The possibilities here are unlimited in terms of infrastructure being leased out or one player being in more than one area of the telecom business,” says the analyst.
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