Telecom: On a fast track

By admin October 21, 2009 6:35 am IST

Telecom: On a fast track 
 
Telecom, one of those few sectors in India, came through almost unscathed from the economic unrest. Along with growth, the industry is also passing through change and consolidation. Increasing competition, more customer demand, affordability and availability of new technologies are some of the factors responsible for this.
Telecom is one of the fastest growing industries, and foreign players and investors are eager to be a part of this growth. A number of new players — Unitech Wireless, Datacom, Swan Telecom, Loop Telecom and S Tel — have recently entered this space, either on their own or in collaboration with a foreign operator. Others like Aircel and Idea, which are regional players, have expanded their reach. 
The war between two key mobile telephony technologies — GSM and CDMA — seems to have settled with GSM emerging as the clear winner. For instance, the two main CDMA operators, Reliance Communications (RCom) and Tata Teleservices, have now launched their services on GSM platform. RCom has already launched its GSM service all over the country and Tata Tele is steadily expanding its GSM offering. The average number of service providers per circle has also increased, from the previous four to six providers to eight or even 10 per circle.

Fortunately, the economic growth and relatively lower tele-density has ensured that the monthly subscriber addition in the last one year has remained in the range of 8-10 million, the highest in the world. Such a high number of subscriber addition is propelling the topline and bottomline growth for most telecom players. The aggregate revenue and net profit of top three listed players — Bharti, RCom and Idea — grew at 32 per cent and 15 per cent respectively in FY ‘09, even in a year of economic slowdown.
 
Rural market
Companies have also started looking at the rural market since the urban markets are getting more and more saturated. Though rural market offers growth, the average telephony consumption per head is less than that of urban areas. Both these factors — stiff competition among different players and acquisition of more and more low-value customers — have brought down the average revenue per user (ARPU) for many of these telecom companies. Most of them have reported a 17-26 per cent decline in ARPU for June 2009 quarter compared to the same period last year.
 
Tower infrastructure Reckoning all these facts, the companies are looking into new avenues to reduce their opex as well as capex. Expense in tower infrastructure typically accounts for 50 per cent of overall capex and many companies are trying to reduce this cost component. Biggies like Bharti, Vodafone and Idea have formed a joint venture company called Indus Tower to share the capex and opex expenses in tower business. Telecom companies are constantly moving up the value chain in terms of their offerings. The most talked about 3G service has finally been launched by the state-owned companies like MTNL and BSNL in Delhi and Mumbai circles. Though the initial response from subscribers is not encouraging, private players are eagerly waiting for 3G spectrum auction, which may happen any time now.