Concerned that the revenue growth of telecom firms would slow down in the January-March quarter, the Telecom Regulatory Authority of India (Trai) will meet the incumbent as well as new operators next month to find out their capex plans for the next fiscal. The meeting would also be a stock taking one to ascertain that there are no slippages on way to achieve the targeted 500 million connections by 2010.
Though the telecom industry has not been affected by the current slowdown so far, the regulator?s concern has emanated from two factors. First, none of the new licensees like Swan Telecom, Unitech Wireless and Datacom have so far placed equipment orders with the vendors though they have been stating that they would start services from the middle of next year. Second, though the Q2 had seen the country?s largest telecom operator Bharti Airtel reporting a 27% jump in its net profit, the company reported a decline in its minutes of usage (MoU) on a sequential basis at 526 minutes, compared to 534 in the quarter preceding it.
In fact, sequentially some slowdown in the revenue and profitability was visible in the second quarter itself if one goes by Bharti?s earnings during the period. The company registered a 27% jump in its net profit at Rs 2,046 crore, compared to the same period last fiscal. The growth was a tad lower than market expectations and compared on a sequential basis, the growth saw a dip as during the previous quarter it had grown 34%. Similarly, while its total revenue grew by 42% at Rs 9,020 crore, compared to same period in the previous fiscal, here too, on a sequential basis, it was slightly lower than the 44% growth witnessed during the first quarter.
Trai officials told FE that the average revenue per user (Arpu) has been falling but that has so far not impacted revenue because of the volumes. However, now since most subscriber addition is happening in the rural areas and C circles, there?s a likelihood that MoU would also start declining. This is because more than 80% connections are in the pre-paid segment and schemes like lifetime validity do not add much to revenue. Once MoU starts declining on a sustained basis revenue growth would slow down. Further, if the new licensees are able to start operations on time, there would be further downward pressure on tariffs, which anyway today are the lowest in the world.
So far, the annual capex of the country?s top two telecom firms, Bharti and Reliance Communications Ltd (Rcomm) have been in the range of $3-4 billion.
Officials said in the January meeting, the regulator would also like to know from the companies what their concerns and problems were.
In fact, in November Bharti Airtel?s chairman Sunil Mittal had expressed concerns stating that the government should carefully look at the various taxes and levies on the telecom sector, otherwise slowly revenue would come under pressure and operators might have no option but to raise tariffs. Taxes and levies comprise about 30% of telecom companies? revenues.
