It was eight years ago that Mukesh Ambani, a man known for taking big risks, announced a unique scheme that gave away mobile phones costing a few thousand rupees for just Rs500.

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While the financially unsuccessful scheme put a quick end to Indian operators’ attempts to ape Western markets by bundling handsets free with each connection, Russian operator MTS on Tuesday announced it wants to have a second go.

“We are a long way since Reliance introduced Monsoon Hungama,” says Vsevolod Rozanov, president and CEO of Sistema Shyam, the company that owns the MTS brand in India.

Unlike Reliance, which offered the phones for a down-payment of Rs500, MTS will offer a Rs16,000, high-end HTC handset for free, and hope to recover it from the customer’s bill for the next 12 months.

In return for taking the handset for free, the customer has to commit to a minimum bill-size of Rs1,500, including SMS, calls and Data. Unlike ‘Hungama’, there will be no separate handset rentals or charges, making the handset ‘free’ for heavy users.

Most analysts, however, were sceptical of the scheme, primarily because of the difficultly of keeping the customer paying through the 12 months. “If you play really safe and target the scheme only at very well off customers, such customers are anyway used to having very clear cut preferences, favorite models etc.. They may not want to pick from one or two or three models offered under a scheme,” pointed out a Delhi-based telecom analyst.

If on the other hand, the company tries to target the mid or mass market - the segment that really needs the scheme - it will come up against issues of credit-worthiness etc., the analyst, who preferred to remain anonymous, added. Such schemes only work in markets like the US which have strong credit-tracking infrastructure that discourages customers from dishonoring their subscription contracts.

Others, however, were willing to wait and see. “It is certainly an interesting move,” said Deepak Kumar of IDC. “Whether the company pushes ahead with the scheme or not would depend on the initial success or failure,” he added.

Indeed, MTS says it has an open mind about whether the scheme will work or not. “There is a reason why we are starting at the high-end.. If it works here, we will progressively address the mid-range market as well,” said Leonid Musatov, chief marketing officer for India.

The sweet-spot for smart phones in India is around Rs10,000 and the company would launch other models, including those from Motorola, Micromax and Samsung, if the first scheme takes off.

Musatov also said MTS would be interested in bidding for extra spectrum to strengthen its data-oriented service in India, particularly in the Wimax-LTE band. The company currently has just 5 MHz of spectrum, out of which it used 2.5 MHz for voice and the rest for data.

In comparison, some GSM operators have as much as 50 MHz of spectrum between their voice, 3G and broadband licenses. Reliance Industries has 20 MHz of spectrum.

Musatov, whose firm has been pushing for the easing of merger and acquisition rules in telecom, said MTS is not interested in acquiring GSM spectrum or operators, but is interested in wireless broadband as it has decided to focus on data for its growth.