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DoT to take on private basic telecom operators - Views on News from Equitymaster
 
 
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  • Sep 6, 1999

    DoT to take on private basic telecom operators

    According to newspaper reports, the Department of Telecommunications (DoT) has authorised its ‘‘Circle Heads’‘ to reduce tariffs in response to competing private basic telecom service networks.

    The DoT, which till recently was a monopoly basic telecom services provider, is responding to the growing threat of competition from private basic service providers, especially in Andhra Pradesh, Maharashtra, Mumbai and Madhya Pradesh. The DoT has, however, specified that rates can be reduced only to match the tariff reductions of private operators. Moreover, it has issued specific guidelines so that it does not trigger a price war.

    The DoT’‘s decision to lower prices, to levels offered by the private players, is aimed at protecting its market share. However, the move is likely to affect the revenues of the DoT, which will then have to rely on a greater extent on budgetary grants from the government. An alternative to this could be an increase in profitability, which could internally finance such discounting activities.

    The private operators, on the other hand, will have to rework their strategies for cracking the DoT dominated market. This, too, will probably result in an extension of the break even period for the operators.

    Although it is yet uncertain whether the private operators or the DoT will be eventual winners, the Indian consumer is definitely going to benefit from the competition that is being unleashed in the telecom market.

     

     

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