Will cell cos be hit by MTNL’s ISD blitz?

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Will cell cos be hit by MTNL’s ISD blitz?

Mahanagar Telephone Nigam, or MTNL, has unleashed a new pricing war in the internet telephony, or voice over internet protocol space by providing cheaper ISD calls to subscribers at Re1 per minute. Subscribers will be able to call 150 countries through their landlines without having to use computers.

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Mahanagar Telephone Nigam , or MTNL, has unleashed a new pricing war in the internet telephony, or voice over internet protocol, space by providing cheaper ISD calls to subscribers at Re 1 per minute. Subscribers will be able to call 150 countries through their landlines without having to use computers.

MTNL has thus becomes India's first state-run company in India to provide internet-telephony. This initiative by MTNL will prompt or compel other companies, which have avoided this for fear of loss of revenue, to initiate similar services. 

Since April 2006, the government has allowed cellular companies unrestricted use of VoIP. While internet service providers offer voice services at Re 1 per minute primarily to the US, mobile operators continue to charge Rs 6.4 per minute for calls to the US and Rs 9.2 per minute to the Gulf. World Phone Internet Services offers ISD calls at 95 paise per minute. Under MTNL's plan VoIP 400, which has a monthly rental of Rs 400 and includes 800 minutes of SIP-SIP, or session initiation protocol, calls free and 10 paise per minute thereafter.

According to the Telecom Regulatory Authority of India's latest figures, 10% of the 2,500 million outgoing ISD minutes in 2005-06 were on VoIP. VoIP grew a whopping 300% in 2006-07 with 800 million minutes, while total ISD outgoing minutes grew just 40% to 3,500 million minutes.

So, will cellular companies feel the pinch of MTNL's latest blitz?

S P Tulsian of sptulsian.com feels that cellular companies will cut prices in line with MTNL. "Other companies will fall in line as this is a fight for market share. MTNL has been losing its market share off late. Price will ultimately get settled at those levels. Initially, mobile companies would be losers but as volumes increase, they will gain," he added.