Despite the average revenues per user (Arpu) coming down sharply, the Indian mobile telephony market continues to attract new players. By the end of 2010, around 14 telcos will be competing for customers in India. One problem for service providers, financial consultancy firm Macquarie points out, would be that the subscriber take-up activity is fast becoming irrelevant with the increasingly high use of dual and three-SIM phones. ?The fragmentation of the minutes of usage across multiple SIMs from different operators will pressure telcos? top lines,? the brokerage believes.
In fact, Macquarie recommends that investors stay away from the sector. Already, in a bid to woo the existing subscribers from the circle incumbents, telcos are launching a variety of tailor-made options. That trend started with RCom launching the ?free minutes quota for each day? plan. Tata Docomo soon introduced the ?per second billing? plan and Uninor followed suit with its ?lower pricing for mid- to high-usage customers?. Hence, the tariff war succeeded in giving a new face to the competition. A few days ago, Stel said it would launch in Himachal Pradesh this week and then in Bihar and Orissa the 1 paise/sec and 0.50 parse/sec plans. As RCom said it would provide 1,000 free minutes of usage for GSM providers on-net in the Delhi-NCR region, it offered a new promotional pack at Rs 195 where users will get 1,000 minutes free talktime on local calls on RCom CDMA and GSM. Tata Indicom, the CDMA brand of Tata Teleservices Ltd, added a pay-per-second plan along with three free minutes along with every three minutes of continued usage.
Analysts say that voice usage revenues for the 50-parse tariff plan show an impact of 10.2% on Arpu based on 1QFY10 industry numbers, with voice usage forming 70%. No rentals for prepaid might have another 5-8% impact that forms 17% of Arpu. While telecos say that the larger tariff concern is concentrated at the bottom of the pyramid with about 20% of the pre-paid users. Industry sources say Bharti Airtel?s 1% change in Arpu would impact the FY11 earnings per share (EPS) by 2.8%. Idea?s EPS changes 9% with 1% change in Arpu and RCom?s EPS by 3-4% with every 1% change in Arpu.
Recently, in an interaction with Mahesh Prasad, president, RCom, said that the lower tariffs are largely focused towards retaining pre-paid user base that churns in high numbers every month. However, clearly, it would take another few quarters before the exact impact of the tariff war could become visible. Analyst in the industry give differing opinions. Kumar S Ranjan, executive partner, India lead communication, media & high tech, Accenture, says revenues coming from the lowest segment of customers may be impacted by 5-10% with the per paisa billings. Prashant Singhal, partner and telecom industry leader, Ernst & Young, feels the impact on overall revenues to be close to early 3-4% in the coming one year. ?The industry will a see a revenue impact of about Rs 3,000-4,000 crore,? he adds.
