INDIA BUSINESS WORLD - MAY 2006
THE MONTH THAT WAS...

FROM JUNE, MUMBAI CALLS COST DELHI RATES

 COME June 1, calling Mumbai will be cheaper for Delhiites using MTNL landlines. The PSU telco will charge fixedline calls between Delhi and Mumbai at local call rates, ie Re 1.20 for a three-minute call.

At present, MTNL charges Re 1.90 for a one-minute call between Delhi and Mumbai. Therefore, the new rates are about 78% lower.

 “The death of distance has finally taken place between Delhi and Mumbai. It is likely to have a ripple effect on other destinations also,” said MTNL chairman and managing director RSP Sinha.

Private operators are also likely to follow MTNL. However, their combined subscriber base is only 10% of MTNL's. MTNL has about 38 lakh subscribers in the two cities put together. At present, private operators charge up to Rs 2.65 a minute.

MTNL accounts for about 90% of the total fixedline subscribers in the two metros. The company on Tuesday announced launching its national long distance (NLD) services. It has taken VSNL's network on lease for carrying its traffic between the two metros.

BSNL is currently the NLD carrier for MTNL. BSNL charges 65 paise per minute from MTNL for carrying its NLD traffic. VSNL has given very attractive rates to MTNL for leasing its network. Therefore, MTNL is able to offer very low prices.

 “MTNL has been paying huge carriage charges for its calls routed outside Delhi and Mumbai. By tying up with VSNL, we shall be buying huge bandwidth capacity (4 STM1s) at a cost of Rs 2.64 crore annually, thereby saving Rs 8-10 crore on cost,” said MTNL director (finance) Anita Soni. MTNL earns between Rs 100-150 crore from STD calls between Delhi and Mumbai, which registers about 12 crore STD minutes with 80% of them made from fixedline phones.

THE department of telecommunications (DoT) has proposed that the current stipulation in telecom FDI norms disallowing foreigners to be CEO/CTO of a company be removed. In a communication to the PMO, the DoT has said that the security agencies can verify the credentials anyway. Presently, Tata Teleservices has a foreigner as its CEO. All telecom operators are opposed to the clause as they feel that this would be a big deterrent in attracting FDI. DoT note to the PMO, however, has opposed service providers' another demand that remote access of telecom networks can be even outside India. Companies such as AT&T and BT, who want to launch operations in the country, want they should be allowed to set up remote access abroad.

In November, the government issued notification for increasing FDI in telecom sector from 49% to 74%. The notification envisaged that the majority of directors, chairman, managing director and CEO should be resident Indian citizens. The appointment of the positions among resident Indian citizens will be made in consultation with serious Indian investors, who will hold at least 10% equity in the company. The DoT would be empowered to notify key positions to be held by such citizens.

All telecom operators are opposing the stipulation in the new FDI norms. Ratan Tata was first to write to the government against the norm. Darryl Green, a foreign national, is the CEO of Tata Teleservices. Bharti chairman Sunil Mittal also opposed the plan saying that if Indians can become CEOs in big foreign telcos, why can't foreigners head Indian telcos. All the operators were given four months for compliance with the new norms. Following strong opposition to the new norms, the government extended the deadline by four months.

Another controversial issue in the new FDI guidelines was that of remote access. The guidelines envisage no remote access for an equipment manufacturer or another agency outside the country for maintenance/repairs by the company except in case of ‘catastrophic software failure'.

ILD service providers are opposing the idea. They want to be allowed remote access anywhere in the world.

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