Analysis: Incumbents operators fight back competition

If government auctions spectrum beyond 4.4 MHz, it will seriously dent DoCoMo

Bhaskar Hazarika & Sanjeev Sharma

New Delhi, February 14: After the bearing the burnt in the in the third quarter revenues, incumbent operators have started to fight back the competition from new entrants.

The entry of new players in to the telecom space, saw introduction of aggressive tariff plans from in the third quarter 2009, forcing incumbents to introduce per second billing plan. Citigroup report states, “Tata DoCoMo in its five initial circles has captured 100-280 basis points revenue share since launch. Even Mumbai & Maharashtra, launched in August, has witnessed an improvement. However given incumbents have now replicated DoCoMo’s offering, this success may not be easy to replicate going forward. If Department of Telecom decides to auction spectrum beyond 4.4 MHz, it will seriously dent DoCoMo’s ability to launch full-fledged in the rural areas.”

The report states that, while new launches have gained revenue share at the expense of incumbents, who were initially reluctant to cut tariffs, all of them have now matched the lower tariffs of the new competitors. Operators such as Vodafone and Idea, who had been more proactive, at least in their new launches, have shown healthy growth, while Bharti, which cut tariffs only in November, witnessed a quarter-on-quarter revenue decline.

Managing director, Tata Teleservices, Anil Sardana said, “If you see our revenues it is increasing. On the pressure on margins for the industry innovation is the step ahead.”

Analysts state that with the overall industry revenues grew marginally (0.6 per cent) in third quarter, Bharti’s revenues declined by 2.1 per cent quarter-on-quarter (1.7 per cent in second quarter), bearing the brunt of the heightened competition with 40-480 basis points revenue share loss in 14 of the total 22 circles. The bulk of the loss occurred in DoCoMo’s five initial launched circles, which contributed ~60 per cent to Bharti’s quarter-on-quarter revenue decline. Citigroup report states Bharti however should regain some lost ground in fourth quarter, given its new tariffs were launched only in November.

“Idea and Vodafone managed to reverse the declining trend with 5.5 per cent and 2.6 per cent revenue growth. While new launches explain the bulk of the growth, they also managed to recapture some revenue share in their core incumbent circles (such as Vodafone in Gujarat, Idea in Kerala and Gujarat). Meanwhile Aircel’s revenue growth at 10.5 per cent was highest amongst all operators. Rcom’s revenue was at 1.7 per cent.

© Time

Foreign telcos ask Trai to fix bandwidth price

New Delhi, Dec 18 2009

Bhaskar Hazarika

Global long-distance carriers BT, AT&T and Cable & Wireless have sought the intervention of Telecom Regulatory Authority of India (Trai) to create a wholesale bandwidth-pricing regime to regulate “the higher bandwidth prices in the country.”

These global operators petitioned the telecom regulator, arguing that a wholesale pricing regime would cut down bandwidth cost for the end-consumer. Apart from these global long distance carriers, Indian operators like Sify, Spectranet, and RailTel, too are in the bandwidth retail business.

There are nine submarine cable networks that offer the bandwidth to long distance carriers here. Tata Communications (formerly know as Videsh Sanchar Nigam) owns five submarine cables, Bharti has two, Reliance Communications one and the consortium of Bharti and Reliance owns another network. Long distance carriers like BT, AT&T buy bulk of bandwidth from these wholesale vendors and further retail it to end-consumers.

A senior Trai official, who did not wish to be identified, told Financial Chronicle that the global carriers had written to the regulator to set up a wholesale pricing regime. “At present, we have a retail pricing on bandwidth but there is no regulation on the wholesale pricing. The regulator is looking at the recommendations made by the carriers on the wholesale pricing,” he added. He said the “bandwidth prices in India today was $5-9 million per 10 gigabytes compared to $1.5-1.7 million in other countries in Asia.”

An email sent to Tata Communications went unanswered.Commenting on the need for a wholesale pricing regime, former Trai advisor, S N Gupta, said, “Once the regulation on the wholesale pricing is done, service-based competition will increase leading to a cut in prices. Asked if the entry of new vendors would ease the pricing, he said entry of new players would not bring competition in this space but would only increase the capacity.

Asia’s privately-owned submarine cable network, Pacnet, is another player, which is setting up a submarine cable network in India under the West Asia Crossing (WAC) project. With the entry of the new player, there will be 10 cable networks in the country.

© Financial Chronicle