Last week, Tata Cellular formally inaugurated its `Costa Corridor', the longest single stretch with cellular coverage in the country. The corridor covers coastal Andhra Pradesh (`Costa' in Telugu means the coast) from Guntur to Visakhapatnam and several towns along the coast. These include Telaprolu, Unguturu, Tanuku, Jaggampeta, Kalkipudi, Uddandapuram, Yellamanchili, Satram and the jaggery town of Ankapalle.
Besides, chilli capital Guntur and Visakhapatnam, the Tata service is available at the Hyderabad-Secunderabad twin cities, Vijayawada, Eluru and Rajahmundhry. The Costa Corridor is only part of a 750-km cellular stretch plan that Tata Cellular had envisaged initially. The company has deferred investments on the rest of the corridor awaiting some "policy decisions" from the department of telecommunications (DoT). These decisions relate to extension of cellular licence period and a proposed moratorium on licence fees.
The rationale behind having its own corridor in the state is to capitalise on the human traffic on the route and provide intra-state communications at a price lower than that of the department of telecommunications (DoT). According to Ajay Pandey, vice-president (marketing) of Tata Cellular, about 11-12 per cent of the company's revenues accrue from such long-distance services which piggyback on its own transmission backbone.
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Status of the project: Like other cellular projects, the Tatas' Andhra Pradesh cellular project is also under pressure. Against an initial cellphone usage projection of 240-250 minutes a month, the company is logging some 120 minutes a month. And, the company _ like other cellular operators _ has also fallen short of the target of realising Rs 11 a minute and is clocking just Rs 6 a minute. Low usage and low realisation reflects in low revenues. Its average airtime revenue has been some Rs 770 per subscriber a month last year, according to the Industrial Credit and Investment Corporation of Inda (ICICI).
The company has currently a subscriber-base of 28,000, which it hopes to take up to 45,000 by the end of March 1999. The company has some 23,000 cellular users on its network end of March 1998 and some 6,000 the previous year. As Pandey says, "Talking about breakeven does not make sense at this point in time."
Costs & Financing: The cost of the first phase of the project is estimated at some Rs 924 crore by ICICI. Tata Communications, which holds the cellular licence in Andhra Pradesh, closed a $110 million (some Rs 430 crore at foreign exchange rates prevailing then) project finance deal in January 1998. The $70 million foreign component of the loan was raised without recourse to the promoters _ Tatas and Bell Canada _ and was priced at 187.5 basis points above the London inter-bank offered rate. The deal, arranged by Bank of America and Toronto Dominion, was the first one in which a domestic financial institution took up a significant exposure. The Industrial Development Bank of India has sanctioned Rs 160 crore to the project.
Cash flows & valuation: Despite the fact that co-promoter Bell Canada is predicted to withdraw from the project (it already has scaled down its equity in its basic telecom venture with the Tatas), the Tata Cellular project is valued as one with significant value. This is because the Tatas hol both the cellular and basic telecom licences in the state and a `reasonable' licence fee of Rs 1,010 crore spread over ten years. The project is valued at $90-110 million (Rs 387-473 crore).