Intense competition, falling revenues and incremental expenditure have affected the balance sheet of almost all telecom operators in India. Post 3G and MNP, they will have to either consolidate or diversify in order to survive
With the imminent launch of third generation (3G) network services and mobile number portability (MNP), Indian telecom companies are now gearing up for the next big move.
The competition is getting hotter, and operators will have to either consolidate or diversify their services in order to survive, analysts say.
The Indian government as well as the Telecom Regulatory Authority of India (TRAI) have shown willingness to provide an exit route for new mobile phone companies which were given licenses and airwaves under controversial circumstances, two years ago. Many of these companies haven't even rolled out their services. Videocon, Sistema Shyam, Uninor, Loop, S Tel, Etisalat DB and Allianz Infratech, have all struggled with their rollout plans. Those that have managed to launch services have seen subscriber growth slowing down to a trickle.
In such a scenario, it seems that the Department of Telecom (DoT) is examining the possibility of allowing new companies to merge with larger operators, shortening the three-year period during which a promoter of a new company cannot sell out, and relaxing the rules to allow incumbents to retain airwaves held by these new companies if a buyout or merger were to happen.
"We believe, the move will help reduce the number of operators in the industry, which in turn will improve the tariff in favour of existing telecom companies," says Kisan Ratilal Choksey Shares and Securities Pvt Ltd, in a research note.
"Otherwise too, the new entrants who acquired licenses in 2008 are facing excessive competition from bigger players, that could make their businesses unviable. Though the government is likely to lose thousands of crores which they could have collected from these operators, it is a positive for exiting players such as Bharti Airtel, Vodafone Essar, Idea Cellular and Reliance Communication (RCom)."
Some bigger players have already started consolidating infrastructure and resources in order to reduce operating costs. Bharti Airtel, Idea and Vodafone together, own telecom tower company Indus Tower Ltd which has a portfolio of over one lakh towers. While Bharti Airtel and Vodafone hold 42% each in Indus Tower, Aditya Birla Telecom Ltd (the owner of Idea Cellular brand) owns a 16% stake in the tower company. These three operators are also in talks to work together to offer 3G services across the country, since none of them managed to get a PAN India license for 3G. This would ease the stiff competition among these major players, which are expected to dominate the 3G-services market in Tier-1 and Tier-2 cities.
The telecom industry has witnessed tariff wars over the past two years, resulting in lower revenue growth and subdued profitability. Over the years, the lack of spectrum, rather the uneven allocation of spectrum, and competition has resulted in poor network performance, which has not kept pace with increased demand.
So, in order to gain market share, these operators resorted to price wars and lowered tariff to such an extent that today India has the lowest average revenue per user (ARPUs) at Rs150.23, in the world.
"Indian service providers are in a frenzy to capture market share as quickly as possible. Thus, new service providers will find it difficult to gain market share in this crowded wireless market," says Shankari Panchapakesan, executive director for telecom practice, Nielsen, in a research report. "They will face challenges in terms of high subscriber acquisition costs, lower ARPUs and lack of adequate spectrum quality. Getting superior network quality and communicating this to consumers will prove helpful."
However, with the exception of new entrants, most telecom operators have kept their call tariffs unchanged over the past few months. With call prices bottoming out and unabated subscriber growth, telecom companies added 13.50 million GSM subscribers in August, the highest since April 2010, taking the total subscriber base up to 465.1 million. (This excludes RCoM and Tata Teleservices Ltd (TTSL) numbers.)
Most telecom operators have witnessed a decline in bottom line performance due to lower revenue contribution from new subscribers and stretched balance sheets. Although the companies have more or less kept tariffs unchanged, adopting the minutes-of-usage (MoU) model to improve revenue per minute has become the most important growth driver. The increased focus on category B and C markets, which remain under penetrated, is also expected to drive strong subscriber growth.
In August, the C circle witnessed the highest traction. It added two million subscribers against the 0.9 million in the month before. In August, metro circles recorded a month-on-month growth of 2.3%, while A and B circles grew by 3.1% each and C circle by 3.2%. New entrant Uninor, had its highest ever net additions at 2.2 million subscribers, led by its new discount offer and more visibility through advertising. Subscriber additions for Bharti Airtel, the country's largest telecom operator, was lower at two million subscribers-its lowest in several quarters. Idea, Vodafone and Aircel maintained their monthly run-rate with two million, 2.3 million and 1.6 million subscribers added, respectively.
----------------- To be continued
No comments:
Post a Comment