Without Recourse

By Ramesh Akkineni

from an article in DNA Money
"We cannot afford to reduce our rates to that level," said an official with one of the big three GSM operators, unwilling to be quoted. "We simply can't afford, due to our network costs."

GSM operators have been claiming they incur a cost of 30-38paise per minute of talk time, whether incoming or outgoing, depending on the network. However, they get to charge only 20paise for incoming calls, resulting in an under-recovery of 10-18paise per incoming minute. Hence, they say, they need to charge outgoing calls at the rate of at least 40-56paise to be able to merely recover their operating expenses. This submission was made to the Trai earlier this year. It is another thing that the regulator threw out the claim and insisted operating expenses were in the range of 13-30paise per minute.

"The new and the cross-over operators have nothing to offer but lower tariffs. They may get some traffic and some customers, but not revenues. Therefore, they do not have a viable and sustainable business model," said Manoj Kohli, CEO of Bharti Airtel.

"I am surprised that banks and institutional players are offering funds to such players without recourse even though they have no business model," Kohli said at an event in Bangalore.

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