Only 3 Telcos See Rise In Sept Revenue

[Himanshu Singh 19]

The record subscriber additions every month are not translating into proportionate revenue rise for the country’s telecom companies. The savage price war over the last couple of months has resulted in ten of the 14 telecom operators in India witnessing a fall in their revenues in the last quarter, an analysis by sector regulator Trai has revealed. 

As per the regulator’s findings, only three operators — Aircel, Reliance Communications, Tatas — and new entrant Telenor have witnessed a rise in revenues for the quarter-ended September 2009, compared with their previous quarter in the same year (June 2009).

According to Trai, despite a record addition of 45 million new cellular customers during this quarter, the combined revenues of all operators fell 0.7% to Rs 38,854 crore in September 2009, compared with Rs 39,108 crore in June. The sector’s revenues for the period ended September ’09 were lower than the industry’s sales figures in December 2008 when it recorded Rs 39,408 crore despite having 125 million fewer customers then.

Aircel has witnessed the maximum jump as it recorded a 6.47% increase in its revenues (refer table). Its chief operating officer Gurdeep Singh told ET that this was on the back of the telco increasing its incremental market share in the new additions space to about 11% during the September 2009 quarter when compared to 7% in the previous quarter.

“Till March 2009, we were a regional brand. We then went national and it takes about 60-90 days for the impact to register — our brand has gained a strong traction with customers and we have been able to attract high quality users leading to the increase in revenues,” Mr Singh said, while adding: “Our brand positioning around value added services and data and growth in the newly added circles are beginning to kick in resulting in the increase in revenues”.

The CEO of a leading GSM telecom company had recently told ET that the full impact of falling tariffs would reflect on all operators books only over the next two quarters. “The sector’s revenues and margins will dip further in the next three to six months despite another 80 million new customers being added during this time,” this executive had added. The scenario is expected to remain the same in Q3 as well.

A recent Citigroup report on the Indian telecom space said: “We forecast wireless revenues for GSM incumbents to grow 1 per cent to 3% quarter-on-quarter aided by strong traffic growth. The encouraging traffic trend is also likely to limit EBITDA margin pressures, which will mean the overall EBITDA will remain flat. The decline for Idea could be more compared with Bharti given aggressive tariff cuts, especially in new circles. Reliance Communications' revenue per minute decline is also likely to get impacted due to tariff cuts announced at the beginning of the quarter”.

The decline in the industry’s revenues due to the ongoing tariff war will also impact the government’s share of earnings from this sector. For instance, as first reported by ET, in the September 2009 quarter, the year-on-year growth in revenues from licence fee and spectrum charges slowed down to 6.4% from 15.8% a year ago, as per data released by Trai.

The growth began to decelerate since the March 2009 quarter when it fell to single digits for the first time in at least eight quarters. The government collected Rs 3,290.5 crore from 18 telecom and long-distance service providers in the country during the quarter ended September 2009.

The declining trend in the government’s revenue growth may affect the department of telecom’s (DoT) suggestion to impose uniform 8.5% licence fee across all the telecom circles, said industry experts. Currently, telecom operators pay 6-10% of adjusted gross revenues as licence fees, the highest for the circle A and lowest for the circle C.

Vodafone Group Plc CEO Vittorio Colao had recently told ET that the company was not concerned about the price war, while also adding that the Indian telecom market needed consolidation to stay in profits. “Vodafone is a long-term player. We can handle price wars and street fights and come out on top in the long-term, but clearly there are too many operators in the market here. In every environment I have seen, not more than 5-6 operators and 3-4 networks have survived – this provides with enough competition from pricing perspective and also space for innovation.

Unfortunately, India has a set of rules that does not allow consolidation. This year, in India, Vodafone had a £350 million operating profit in the first six months and we investing £1 billion. No player in India other than Bharti Airtel has positive cash flow and we should make sure that there is enough cash in the system for future investments,” Mr Coloa had said.

[::Hitesh:: 1,763]

^^^

Today almost every one is giving free sim cards, how they will get growth in revenues !

Also every one is taking 1sec plan.

Main problem is there are more competitors in market with price war !!

[srk006 21]

and these three (Aircel, RCOM and Tata) offers the lowest tariff.. so what is the moral of the story

[vvinayakpai 26]

^^^^^^

I am sorry I afail to agree with you. The above data is for the quarter ended September, 2009. To the best of my knowledge RCOM introduced their first simple plan (the 50ps scheme) on 8th october, 2009 which shlould only reflect in the quarter ending december, 2009.

The full impact of the pay per second and the pay per call would be seen only in the quarter ending March, 2010 because it was introduced sometime in November, 2009.

Lets wait and watch out for these statistics in the near future.

Edited January 11, 2010 by vvinayakpai

[KumaarShah 143]

Exactly....

RCOMs revenues as also others revenues will have taken a severe hit post the simple plans....

[::Hitesh:: 1,763]

^^^

Let us see in next 3 months....

[SUDYEcaZ 67]

I don't think revenues will take a bad hit

margins might drop,

which happens in all industry,

35-40% margin is just too much to sustain in long term...it will come down to 20% and stabilize

Revenues wont be impacted as their are many customers who have actually increased their usage rate

I remember giving miss calls to friends to communicant a msg, but now how many of us actually thinks before making a call

also pay per sec hav increased usage rate in lot of students

telecos like Aritel and Voda might take a impact as they are the costliest in terms of tariffs

and many customers have started dumping or have made it just for incoming

[srk006 21]

^^^ I too share the same opinion.. Revenues are not going to see a drastic fall as these telcos project/pretend to happen.. 

It may just be their gimmick to create a soft-corner in govt for some subsidies/tax-sops(just my stupid opinion... he he.. ...)  

Govt. is already considering giving license-fee relief to BSNL.. 

http://economictimes.indiatimes.com/news/news-by-industry/telecom/BSNL-may-get-licence-fee-relief-to-regain-lost-ground/articleshow/5418286.cms

[ravi_patent 28]

^^

lil off topic...proposing releif but not the much needed autonomy to bsnl

[KanagaDeepan 1,084]

I don't think revenues will take a bad hit

margins might drop,

which happens in all industry,

35-40% margin is just too much to sustain in long term...it will come down to 20% and stabilize

Revenues wont be impacted as their are many customers who have actually increased their usage rate

I remember giving miss calls to friends to communicant a msg, but now how many of us actually thinks before making a call

also pay per sec hav increased usage rate in lot of students

telecos like Aritel and Voda might take a impact as they are the costliest in terms of tariffs

and many customers have started dumping or have made it just for incoming

Agree with each and every word of you Sudharsan Ji...