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

Multiple SIM usage to impact top line margin for telcos

Bhaskar Hazarika & Sanjeev Sharma

New Delhi, December 20: The increasing usage of multiple SIMs will have an adverse impact on the revenue of operators in the long-term. With dual and three SIM phenomenon there will be a fragmentation in the minutes of usage on the operators.

According to a Macquarie report, “Subscribers take-up activity is becoming increasingly irrelevant, with dual and three SIM phenomenon increasingly visible. Minutes of usage fragmentation across multiple SIMs from different operators will pressure telcos top line.”

According to data from the Cellular Operators Association of India, GSM operators (excluding GSM SIMs for the two large CDMA operators Reliance Communications and Tata DoCoMo) added 11.1 million SIMs in November. In October the GSM operators added 10.3 million SIMs, 8.6 million in September, 9.3 million in August.

President of Indian Cellular Association, Pankaj Mohindroo said that there has been significant increase in the number of multiple SIM usage among the subscribers. “According to industry estimates the dual SIM card handset users in the market is around 25 million. If you take in to account the Delhi circle there are 25 million subscribers compared to the total population of 17 million. This clearly states that the number of SIM cards has surpassed the total population,” he said.

Chief corporate affair officer of Idea Cellular, Rajat Mukherji told Financial Chronicle that multiple SIM usage is witnessed predominantly in the circles where the tele-density is relatively higher. “The premium markets are witnessing the growth of multiple SIMs. However, there is a clear distinction between the voice and the non-voice segment. When an individual uses two SIM cards, he makes clear distinction in his usage pattern --- one for voice usage and the other for data, vas services,” he said.

Mukherji added that a lot of BlackBerry subscribers have their second phone, which is used primarily for calling. “Since the tariffs are already low for almost all the operators, we do not see any tariff arbitrage in this case. This is an industry wide phenomenon, which all the operators are likely to face,” he added.

Emails sent across to Vodafone, Bharti Airtel and Aircel did not elicit any response.

With cloud of uncertainty hovering over the mobile number portability (MNP), the consumer is left with no other option than to get an additional SIM card for his use. It may be noted that the existing SIM card continues to be under usage, only to retain the number. Mobile number portability was earlier slated to be launched on December 31, but has been deferred by three months. The operators have expressed their inability to launch the service stating that the implementation of the service is not complete.

© Financial Chronicle