Cellular players have begun to gear up for the newest entrant with several strategies beginning with the obvious drop in tariffs. Says Sandip Das, chief executive officer of Hutchison Max, "None of the operators can allow MTNL to get away with their market."

Clearly, they will leave no stone unturned to retain the customer base that they have built over the years and sunk huge money towards. Bharati Cellular's CEO Sanjay Kapoor says he will do everything it takes to maintain Airtel's leadership in Delhi. The first counter-attack in all probability will be selling below cost. "We will rebalance our tariff structure in a week or 10 days. By that time one would be able to work out the details," says Mr Sanjay Kapoor.

Price wars and realignment of tariffs is something the industry has been living with for a while now and Asim Ghosh, managing director, Hutchison Max India says: "All it would do is push up the break-even further." "The entry of the third operator in the market will definitely disturb the break-even point, and it will not be a nominal effect, the usage time as well as number of subscribers have to increase tremendously to be able to retain the present situation," says Mr Kapoor.

BPL Mobile CEO, Girish Rangan also did not rule tariff cuts as his first move but admits that this cannot work as a long term strategy. "It is not prudent to try and match tarif point-to point." he explains. Analysts too see these players resorting to tariff-cuts as a short to medium term measure. "At the end of the day, it is the value-added services which will matter," said Jaideep Ghosh, principal consultant, at the Mumbai-based PricewaterhouseCoopers. Key players are already talking in terms of giving competitive packages for customers, both in terms of quality and tariff.

BPL, for one, is contemplating a series of measures including value-added services. Says Mr Rangan: "We are very clear in our minds that value-added services will be the single biggest differentiator in this race."

Consider what he has up his sleeves: commercial launch of its GPRS service within six weeks. The company will be launching Motorola's Timepost (costing Rs 25,000) in 6-8 weeks. Cost-sharing arrangement with the manufacturers is being talked about to make the product more affordable. Bharati Cellular is also expected to develop offerings around location-based services and Intelligent Network platform. Says Mr Kapoor: "Even our WAP services, seen as a transition towards wireless Internet will recieve a boost with GPRS becoming a reality next fiscal." Not to be left behind, Orange too will be playing the GPRS card (it will be soon launching SMS 31 version). However Mr Ghosh clearly states that India, to Orange is more of a plain vanilla market where attractive tariffing is likely to works better than anything else.

But for most players, the strategy clearly encompasses a cut in tariffs combined with an offering of value-added services. "Cellular services is not a game that can be won by lowering prices, we will make our pricing competitive as well but will offer superior experience," says Mr Kapoor and added, "We have geared ourselves over the last five years and the new operator will have alot of catching up to do in terms of equity, infrastructure processes and customer interface."

MTNL may be dragged to court
The cellular price war kicked off by MTNL which announced the tariff for its mobile service to be launched on February 28, might find its way to the court of law if it is proved that MTNL is cross-subsidising its cellular service, ie, not paying the Rs 1.40 per 3-minute call to its basic counterpart as all other operators do.

"Though it is too early to say that MTNL is cross-subsidising, if it is proved we might take it to the highest adjudicator, including the Supreme Court," an official with a top cellular company told The Financial Express.

Another Mumbai-based official in the cellular industry said, "We have written to the Telecom Regulatory Commission of India (Trai) asking for clarification on the issue."

However, it is not yet clear whether they have done it under the aegis of the Cellular Operators Association of India or on their own. But, if it is established that MTNL is cross-subsidising, these cellular operators might take it up with Trai. As of today, the cellular operators have to pay the basic operator (MTNL in case of Mumbai) Rs 1.40 for a three minute call made from the cellular to a landline phone.

Trai will find out whether Dolphin (MTNL's mobile service) pays a similar amount to MTNL basic service.

Industry sources don't seem to be entirely convinced that it is possible to offer mobile services at the rate announced by MTNL, namely, Rs 1.50 and Rs 2.70 for an incoming and an outgoing call respectively.

The Trai guidelines very clearly say that there can be no cross-subsidisation and regulators globally have been very sensitive to the whole issue of cross-subsidisation.