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New mobile operators are still struggling to get a foothold into the market four years after licences were issued to them. On January 10, 2008, the Ministry of Communication had to take a controversial decision to award licences to six companies including Uninor, Videocon, Etisalat DB, Loop Telecom and Sistema Shyam.
But exactly four years later, barring Uninor and Sistema Shyam, all others have fared poorly both in terms of subscriber addition and revenue generation.
These six operators hold 29 per cent of the country's spectrum, but account for merely 8.5 per cent of the total subscriber base, and 3.5 per cent of industry mobile revenue – a stark contrast to the enthusiasm these operators had shown while applying for licence.
Even those who are seemingly doing better than the others are finding it tough. Sistema Shyam, which operates mobile services under the MTS brand, reported net loss of Rs 1,009.7 crore for the third quarter ended September 30 compared with a net loss of Rs 494 crore during July-September in 2010.
Roll out obligation
Only Uninor has managed to narrow losses with a steady addition of subscribers.
But none of the others are making a dent into the incumbent's market share. Most of the new players have rolled out networks barely enough to meet the roll out obligation. Etisalat DB, for example, claims to have met the roll out obligation but one cannot find too many retail outlets for buying a connection.
Even the introduction of Mobile Number Portability has not helped. In most other countries, where number portability has been introduced, it is the new players, which has benefited the most. In India, the incumbents are the ones getting maximum number of subscribers porting into their networks.
These players blame the uncertainty surrounding their licences due to the ongoing 2G investigation.
“When the Government is talking about cancelling licences and taking back spectrum how can we take the risk of investing more for offering services,” said a new player.
While the consumer has lost out as a result of this in terms of availability of choice of operators, the biggest loser is the Government.
These operators together paid less than Rs 90 crore to the Government during the quarter ended September 2011 in the form of licence fee and spectrum charges.
Of this, Rs 70 crore was given by just two players — Uninor and Sistema Shyam. If the other players had also rolled out services to the full potential, the Government would have earned double of current levels.
Market watchers say that the proposed exit policy being formulated by the TRAI should help the beleaguered companies to bail out. “The exit by some of the operators will not only bring down the level of perceived competition, but also will release the much-needed 2G spectrum, which is the need of the industry currently.
From the incumbent operators' perspective, this will also have positive implication on the pricing of excess spectrum and spectrum renewal,” says a sector report from Karvy.
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