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Business – Rise in user base fails to drive up telcos’ revenues

Joji Thomas Philip

NEW DELHI: Despite record subscriber additions every month, nine of the fourteen telecom operators in India have witnessed a fall in their
revenues in the last quarter, an analysis by sector regulator Trai has revealed. As per the regulator’s findings, state-owned telcos BSNL & MTNL, Etisalat, HFCL, Loop, Reliance Communications, Tata Telservices, and Vodafone Essar have seen their revenues fall in the quarter-ended June ’09, when compared to their previous quarter in the same year (March ’09).

Trai has also pointed out that while the likes of Bharti, Idea and Aircel have recorded a growth in their revenues for the three-month period ended June ’09, their increase is less than 1% on a q-o-q basis. Trai’s analysis also reveals that on a q-o-q basis the telecom sector’s revenues fell by about 5% to Rs 31,240 crore in June ’09 when compared to Rs 32,729 crore for the quarter ended March ’09.

“Trai’s data is only for the first quarter of this fiscal and it shows that the initial impact of the competitive intensity that is being felt by the sector. With more players set to launch operations and as those who started mobile services recently expanding to new circles, the full impact of competition will be felt over the next 12-24 months. The ongoing tariff war will further erode revenues and margins — millions of subscribers will continue to be added over the next two years but operators’ revenues will remain flat,” explained a top executive with a leading operator.

This telco also added that if new entrants as well as existing operators who are yet to see profits will jointly lose over Rs 100,000 crore within the next three-five years as telcos go all out to grab subscribers.
The regulator’s data also shows that five telcos including market leader Bharti Airtel, the country’s second largest operator Reliance Communications, state-owned telcos BSNL & MTNL, Tatas as well as HFCL have also recorded lower sales figures in June ’09 when compared to the corresponding period last year.

Over the 12 month period, the country’s telecom sector has witnessed close to a 11% fall in revenues despite adding over 140 million new subscribers during this period. The mobile subscriber base went up to 427 million as of June ’09 when compared to 287 million in the corresponding period last year.

Again, over a 12 month period, Trai’s figures show that Tatas have recorded a maximum fall in their revenues at
36.21% followed by Reliance Communications who sales were down by 27% along with the two state-owned telcos BSNL and MTNL whose financials decreased by 23% and 22% respectively. The spokesperson for both Tatas & RCOM did not comment on the Trai report, especially with regard to their companies.

Amongst pan-India operators, Idea Cellular was the best performer recording a 24% annual increase in revenues, followed by Aircel with an 18.6 % rise in its numbers and Vodafone Essar whose sales are up by nearly 9% over the 12 month period ending June ’09.

An executive with MTNL said that saturation in the two markets where it operates – Delhi & Mumbai, falling numbers in landline users and the telco’s inability to expand to overseas markets were primarily responsible for the dip in revenues. Top BSNL executives, speaking on condition of anonymity, had earlier told said the company has been severely hobbled by political interference.

The telco had ran out of capacity to expand cellular services nearly 18 months ago, and no new major contracts for mobile networks and equipment have been awarded in the past 24 months. Besides, BSNL’s bottom line has also taken a huge hit on account of landline surrenders.

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October 16, 2009 - Posted by | Uncategorized |

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