Barely 24-hours after Mr Narender Sharma, chairman and managing director of MTNL, confidently proclaimed that "the private operators will not be able to match our prices," late Thursday night, Hutchison Essar dramatically announced tariffs which were just 10 paisa per minute more than those being offered by MTNL. And on Friday morning, it was AirTel's turn to tango.

Under the new Airtel tariffs, which will come into effect on February 1, incoming calls will be charged at Rs 2.85 per minute and outgoing at Rs 1.60 per minute as opposed to Rs 4 per minute, which is the current charge for both incoming and outgoing calls. The monthly rental has also been revised to Rs 400 from Rs 600 currently, to match MTNL's price. The equally aggressive pricing by the two existing Delhi cellular operators has taken away the unique selling proposition of MTNL, which with its predatory price of Rs 2.70 per minute for outgoing and Rs 1.60 per minute for incoming calls, had animated the telecom market.

And in a matter of hours, the paradigm has changed. Till Thursday, the price point was the topic of discussion. But now that the prices are comparative, the paradigm has changed from price to the quality of service, says Mr Sanjay Kapoor, CEO, Bharti Cellular.

"While the availability of larger capacities and more players invariably draw down prices in any market, the real parameters of success get tested on grounds of products and service performance," he adds.

And if MTNL's track record for its customer services is anything to go by, it is time for the PSU to start getting worried. "With MTNL doing such a bad job of its landline service, I was anyway not going to switch to MTNL for cellular service, where thankfully I have an option. Now with the price cut by private operators as well, the very question does not arise," says a Delhi-based cellular subscriber.

Meanwhile, Mr Sudarshan Banerjee, CEO, Hutchison Essar, says that his company's decision to drop prices was not part of a reaction to MTNL, but a "coincidence". While he does not see this situation as a price war, he does say that "now that affordability is in place, the battle will hinge on providing superior experience to the customers."

He also dispels fears that cheaper prices mean cheaper services. "We will deliver more value in the same money and will keep on upgrading the service."

But it's not only the Delhi operators, who have risen to meet the MTNL challenge. Hutchison Whampoa, the mobile operator in Delhi and Mumbai, will also make a "competitive offering to the customers, by the time the MTNL starts its services," says Mr Asim Ghosh, who heads the Hutchison's operations in India.

However, the impact of MTNL's entry in the Mumbai cellular market, will not be as shocking as that of the Delhi market because prices of cellular services in Mumbai are already quite reasonable as compared to the cellular operators in Delhi.

BPL Mobile charges a weighted rate of Rs 3.50 per minute and has a rental fee of Rs 395 per month. Hutchison Max, the other Mumbai cellular operator, charges an effective rate of Rs 2.85 per minute and a monthly rental of Rs 395.

BPL Mobile chief, Mr Rajeev Chandreshekhar, also says that while BPL, the other cellular operator in Mumbai, will drop its prices, till now the tune is "It will still be higher than MTNL rates, and will be positioned as a premium service." However, a lot can change till February-end, when MTNL is scheduled to enter the Mumbai market.

Meanwhile, the Kolkatta cellular operators, where Bharat Sanchar Nigam Limited (BSNL) is expected to start its services on a small scale as the third operator by the end of January, have also slashed their prices.

Command Cellphone, one of Kolkata's cellular providers, slashed its monthly rentals and tariffs on outgoing calls. Usha Martin Telekom, the company that owns the Command brand, has also changed the tariff structure of its pre-paid card. The incoming calls will now be charged at Rs 3 per call received and the outgoing at Rs 6 per call generated.

Spice Communications Limited, the other Kolkatta service provider, has also dropped its tariff charges for its Kolkatta and Punjab operations. An average user of the new tariff plans can expect a reduction of Rs 100-Rs 125 in his monthly bill.

Meanwhile, all operators agree that the entry of the third operator will become the "inflection point" for the cellular market. "Entry of the third operator-be it MTNL or BSNL-will increase the size of the cake and make it big enough for all," says Mr Kapoor. He is confident that the entry of the third operator, "will increase the market by at least 75 to 100 per cent."

Mr Banerjee's estimate is more conservative. He predicts that the price cuts will help "grow the Delhi cellular market by at least 50 per cent in this year itself." Currently, Airtel has 2.75 lakh subscribers in Delhi and and Hutchison Essar has 1.85 lakh subscribers in Delhi, as per the December figures released by the COAI.