Info-tech

Telecom: A year of high spectrum spends and tepid results

Eswarkrishnan Chellam | Updated on January 27, 2018 Published on February 24, 2016

telecom-table

Call drop charges, Jio launch pose fresh threats to service providers



The performance of telecom stocks over the past year has been lacklustre. Bharti Airtel, Reliance Communications (RCom) and Idea Cellular are down 7 per cent, 23 per cent and 31 per cent, respectively, and are trading close to their 52-week lows.

With Reliance Industries’ telecom venture Jio set for a commercial launch in a few months, competition is set to intensify further. This could squeeze the margins of existing players.

In late February 2015, the Supreme Court allowed the Centre to proceed with the auction of bands in 800 MHz, 900 MHz, 1,800 MHz and 2,100 MHz for all States. The auction concluded in the last week of March 2015.

The 2016 auctions are expected to be pricier. The Telecom Regulatory Authority of India (TRAI) has recommended auctioning of available spectrum including the highly efficient 700 MHz for the first time.

However, telecom operators oppose it as the existing infrastructure does not completely support it. In the midst of rolling out 4G services and recent spends on spectrum, a section of the industry feels this is premature and will add to their woes.

Telecom players put up a lukewarm show for the quarter ended December 2015.

Bharti Airtel — the largest player by subscribers — delivered 1 per cent growth in revenues, while net profits were down by a fourth, quarter-on-quarter. Revenues from Africa and South Asia were flat. But the company witnessed growth in digital TV services (5 per cent) and mobile data usage (10 per cent).

For Idea Cellular data ARPU (average revenue per user) was on a stronger footing. While average voice ARPU fell around 2 per cent, data grew almost by a fifth. Net sales grew around 4 per cent while net profits fell 6 per cent quarter-on-quarter.

RCom’s net sales fell about 2 per cent, while net profits grew 9.6 per cent quarter-on-quarter.

The company has taken steps to pare its debt by monetising its assets. It is shortly expected to sell its tower and related infrastructure business.

Tata Communications mainly provides voice solutions and data services for global carriers, service providers and mid-market segments in India.

For the quarter ending December 2015, its revenue growth was flat sequentially while profits jumped 264 per cent on the back of tax credits.

Higher tariffs

TRAI had asked telecom operators to compensate customers at ₹1 for each call drop, capped at ₹3 a day starting January 2016. The operators are contesting the order in court. If implemented, the additional costs will most likely push up tariffs.

Consolidation, continuing investments in spectrum, higher spending on sales and marketing and infrastructure, with added competition from Reliance Jio, are expected to intensify pressure on growth and margins.

Published on February 24, 2016
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