Bharti says price war temporary; to outsource more

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The price war between Indian mobile operators, which has slashed call charges to around 1.3 cents a minute, will not last, the Chief Executive of Bharti Airtel said. Still Bharti, which has more than 110 million mobile users, would look to cut costs through outsourcing to protect its margins, Manoj Kohli said.

The mobile industry is going through a phase of intense competition, with firms cutting charges to as low a 1 paise per second (approximately 1.3 cents per minute) to grab customers ahead of launches by four new operators. "This price situation, we believe, is a short-term situation because new operators and present loss-making operators may not be able to continue with this kind of low price," Kohli told reporters at a World Economic Forum event in New Delhi. The per-second billing war, which Bharti joined at the end of October, was kicked off by the success of sixth-ranked Tata Teleservices ' plan for its news GSM service. Tata, partnered by Japan's NTT DoCoMo signed up a market-leading four million customers in September, while Bharti signed up 2.51 million users, its lowest new additions in about 12-18 months.

Kohli saw the industry's average revenue per user (ARPU) falling as more customers from rural areas were signed up, and said Bharti would protect margins by cutting costs. "Price per minute today is going down, but we are ensuring that the cost per minute also goes down," he said.

Bharti has outsourced its information technology needs to IBM and in April signed a five-year managed services deal with Alcatel-Lucent worth USD 500 million, and Kohli said it wanted to do more such deals. "I can say more of such outsourcing will happen."

Kohli said Bharti did not see a reason for a reduction in termination charges, which the telecom minister has asked for, as they had been cut earlier this year. The government wants the charges mobile operators pay each other for calls across networks cut, the minister said last week, a move that could push call prices even lower.

Bharti was expanding into areas such as mobile commerce, including using phones for money transfers and bill payments, to boost revenues. Kholi said there had been positive results in Bharti's pilot mobile banking project with leading bank State Bank of India, and, once it had approval from the central bank, a commercial launch could be possible in six months.