Sistema joins pay-per-second telecom club

6 Oct 2009, 0010 hrs IST, Rashmi Pratap, ET Bureau


MUMBAI: The great Indian telecom tariff war seems to be escalating. Tata DoCoMo triggered the latest round by offering calls at one paisa per second resulting in new as well as established players slugging it out to launch similar offers at break-neck speed.

CDMA player Sistema Shyam Teleservices will announce per second billing when it enters Delhi this week and will introduce it in all the circles where it launches operations.

India’s third-largest operator Vodafone Essar is currently testing the waters in the Madhya Pradesh circle, Aircel Cellular has opted for the per second offer in five circles and is likely to extend it to Delhi soon.

Sistema, which offers services under the MTS brand, has chosen per second billing as its entry strategy to ensure it is able to get fast traction in the lucrative Delhi circle. “Power of 1 (the plan’s brand name), combined with free one million seconds on our networks, will bring in high average revenue per user (ARPU). Revenue generation is what we are focusing on right now,” Sistema Shyam president & CEO Vsevolod Rozanov told ET.


Sistema needs to acquire around 30 million users in the next three years to break-even and the per second billing will be an important plank of the strategy to meet that target. “We clearly see that at this stage, we are aiming at breaking even. We believe that these kinds of offers will support our ambitious targets,” he added. Sistema will be the first operator to offer the service in the lucrative Delhi circle. DoCoMo has, till now, launched it in nine circles.

Aircel has already launched the scheme in Orissa, Bihar, West Bengal, Kolkata and Kerala. “We believed that in these five circles, incremental ARPUs were not aligned with the traction that the brand is witnessing elsewhere. That is why we opted for per second billing. We are following a ‘pick and choose’ strategy,” Aircel Cellular COO Gurdeep Singh told ET.

Industry sources said Aircel, market leader in Chennai and Tamil Nadu, is considering extending a paisa per second scheme to some other circles too.

HSBC Securities and Capital Markets analyst Rajiv Sharma had forecast in August this year that per second billing could be opted for by new players. “In our view, the two obvious strategies of new players would be to focus on urban centres and leveraging their empty network as a subscriber acquisition tool,” he had said, referring to per second billing.

MTS seems to be adopting that strategy to better utilise its empty network in Delhi. “If it works, we view a move to per-second pricing as the biggest risk to the incumbents and the overall sector. Our analysis suggests that if competitors - incumbents and newcomers alike - switched to a similar plan the sector could see a revenue loss of 10-15%,” Mr Sharma said.

It is very likely that the established players will face some short-term disruption, according to analysts.