The road ahead for telcos is bumpy or at least not that smooth. With decline in ARPU (Average Revenue per User) and subscriber additions, now revenues are taking hit globally. Indian telecom sector won’t be exception either.
According to research firm Ovum, global connections will grow by less than 4 percent CAGR between 2012 and 2018, while global revenue will grow less than half of that rate. As operator has already started feeling the heat of revenue decline, they need to find new ways to generate revenue and serve subscribers profitably, says Ovum report.
According to report, global mobile connections will grow to 8.1 billion in 2018 from 6.5 billion in 2012, while annual mobile service revenues will rise to $1.1tn from US $968mn. However, global revenue will contract by 1{af589cdba9d77786c8c861317dbad60bba1e2ebbf56e2ffab874a1b59fde9ce3} in year 2018, compared to revenue marked in year 2017. This would be the first time in the history of mobile industry such revenue decline will be recorded.
As far as markets are concerned, US and W.Europe has already reached the level of maturity and will continue to grow slowly, while Middle East will record the largest decline of 2.5{af589cdba9d77786c8c861317dbad60bba1e2ebbf56e2ffab874a1b59fde9ce3} CAGR among all regions from 2012 to 2018. Except Africa, where revenues are expected to rise at a CAGR 4.2{af589cdba9d77786c8c861317dbad60bba1e2ebbf56e2ffab874a1b59fde9ce3} throughout the forecast, no other regions would even clock growth more than 3{af589cdba9d77786c8c861317dbad60bba1e2ebbf56e2ffab874a1b59fde9ce3} CAGR. Report also cites some select market growth in Asia Pacific & Lat. America, but it won’t match to Africa revenue growth.
Indian telecom industry, as said, is currently reeling under debt pressures, where total industry debt is expected to rise to 2,50,000 Cr INR in 2012-13 from 1,85,000 Cr in year 2011-12. While subscriber additions have declined from 900 million in 2011-12 to 865 million, revenues are expected to grow at 5.7{af589cdba9d77786c8c861317dbad60bba1e2ebbf56e2ffab874a1b59fde9ce3} CAGR in current fiscal.
What factors have killed the telecom industry in India? Apart from policy flip-flops and 2G Scam, the rising costs, extra-orbit ant spectrum fees & service tax and decline of revenue due to stable MoU and decline ARPUs have totaling effect. Moreover, there’s decline in FDI flows into the industry due to global economic slowdown and negative perception over policy making.
Road ahead- it would be challenging to see how telcos cope with the challenges faced by whole industry. Albeit all these facts, some of the telcos in India have continued to grow, betting high on rising data demand (revenues) and rural expansions. Also much awaited are M&A norms, where some debt ridden telcos have already started negotiating with their counterparts to get rid of loss making units across India and pave ways to merge.
