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WiLL: MTNL kicks off the race - Views on News from Equitymaster
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  • Dec 31, 2001

    WiLL: MTNL kicks off the race

    After a big tussle between cellular and basic operators, Wireless in Local Loop (WiLL) is finally here. Mahanagar Telephone Nigam Limited (MTNL), the state owned basic service provider (BSP) in Mumbai and Delhi, has launched its WiLL service in Mumbai. This is expected to trigger another round of reduction in airtime charges in the cellular segment.

    Click here to know more about WiLL

    Companies like MTNL, Hughes Tele and Bharti, which provide basic telephony services, are allowed to provide limited mobility to their customers. Since BSPs can provide WiLL services in a short distance calling area (SDCA), cellular service providers are at a big disadvantage. SDCA would typically mean a local call area. Interestingly, all metros are SDCAs. So, a user can avail for the WiLL service, which will allow him mobile communication facility, for say, entire Mumbai! MTNL’s WiLL service is available in Mumbai region (except Navi Mumbai). The PSU major already provides WiLL service in Delhi (in a limited way) and its subscriber base is estimated at around 10,000-15,000.

    By pricing the monthly rentals and deposits competitively, MTNL has increased the attractiveness of the service. While incoming calls are free of cost, outgoing calls are charged at the rate of Rs 1.20 per minute, which is also the ruling basic telephony charge. There are two options. One, on a security deposit of Rs 5,000, MTNL would provide the instrument and on the surrender of the instrument, the security deposit would be refunded. The other option is for the subscriber to buy the handset from the market with no security deposit. The handsets are already available in the market and one can expect rates to fall in the coming years. The monthly rental at Rs 450 is the same for both the options. Following this, cellular service providers are expected to slash airtime charges in the metros and Category ‘A’ circles.

    As far as MTNL is concerned, tariff rationalisation, slower subscriber growth and competition have been slowing revenue growth of the company. But the introduction of WiLL is expected to open new growth opportunity for the company. Following MTNL, competitors like Hughes Tele are also expected to introduce WiLL service. In that case, efficient customer service would be the key differentiating factor. Will MTNL rise to the occasion remains to be seen?

    One of the key advantages of WiLL is that it enables the BSPs to meet the rural connectivity targets as set by the BSP license. Since there are significant costs involved in increasing rural connectivity (like laying cables and installing switches), WiLL acts as an effective alternative. Instead of laying cables that is costly and often time consuming, FSPs can now install switches. This will enable them to provide basic telephony services in rural areas, which were not accessible and viable till now.

    India’s tele-density at 2.6% is one of the lowest in the world. Hitherto, the PSU majors have not laid much emphasis on rural connectivity and that’s is one of the reasons why penetration levels in India has failed to take off. This coupled with the poor service quality has not helped much in meeting tele-density targets set by the previous National Telecom Policies (NTP). Now, with the introduction of WiLL, we are slowing moving towards achieving the 7% tele-density set by the NTP-99 by FY05.



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