I am no fan of analyzing financial results of telecom operators. Many times I tend to ignore such report as for me financial stats are just one way to look at the health of the company/industry. But these days, soon after TRAI’s Final Recommendation on Spectrum Management were released, I observed lots of panic among operators to an extent, where many of them started hitting it back to regulator/government –rather unnecessarily.
Now when today, Vodafone group pressed panic button and hit it hard at TRAI, saying that government should reject TRAI’s proposed recommendations, I feel it has become routine practice among telcos to hide real issues behind false blame-game. When Bharti declared its quarter results last month, it generated widespread panic in market, as the statement released showed that Q4 profit of Bharti fell 8{af589cdba9d77786c8c861317dbad60bba1e2ebbf56e2ffab874a1b59fde9ce3}. Soon Rcom joined the race by declaring that its Q4 net profit falls 16{af589cdba9d77786c8c861317dbad60bba1e2ebbf56e2ffab874a1b59fde9ce3}. So it became obvious that, when top two telcos are among the profit losers, same fate lies ahead for rest of them. Newcomers like Uninor also started feeling the heat.
Vodafone-Essar, the second largest GSM operator in India, too had bad Q4 results. It declared that its profit margin in India (EBDITA) has fallen from 33{af589cdba9d77786c8c861317dbad60bba1e2ebbf56e2ffab874a1b59fde9ce3} in 2007-2008 to 24{af589cdba9d77786c8c861317dbad60bba1e2ebbf56e2ffab874a1b59fde9ce3} in 2009-2010. Moreover, there’s tremendous pressure to build funds for currently ongoing 3G spectrum auction and then for network rollouts. But is there any point in blaming Regulator altogether for all this?
I can see how this downward spiral started. When I wrote my first post on per-sec-billing, last year, the revolutionary billing model was getting tremendous favor among operators. After the launch of per-sec-billing by DoCoMo, every other operator came under pressure to follow the suite. Later when I discussed the validity of per-sec-billing model, I observed that, though this billing model is disruptive, it doesn’t hold any long term promise for telcos.
Amid intense tariff wars, also there’s pressure on telcos to arrange resources for ongoing 3G auction, which has already cross price of INR 15000 Cr for pan-India operations. More trouble for operators came through TRAI’s recommendations on spectrum management ( which I discussed in deep here), which demanded operators to pay one time entry fee for spectrum beyond stipulated limits. Then there’s pressure to rollout 3G network, keeping in sync with green policies of DoT. And with every other day some or other telcos brining voice tariffs down, it questions the viability of such model in long term. Where are we heading?
I am of different opinion. Till last few years operators are earning heavy profits- thanks to Regulator’s low entry barrier for 2G spectrum (INR 1659 Cr entry fee to start telecom operations) and then assigning extra spectrum virtually free of cost. Telcos have enjoyed earning profits on countries natural resources without paying much cost over it. And since then TRAI hasn’t made any sweeping changes in its outdated NTP-99. For last 11 years, Indian telecom operators enjoyed benefits of Regulator’s lose hands and now with few recommendations they woke up by alarming bells.
The bigger picture is different. Intense mobile tariff price war & deep fragmentation of Indian market is killing the entire telecom ecosystem. Now is the time to look at it. Even though operators are adding more than 20 million subscribers per month, it’s not showing up in revenues- why? We have to think on different lines. With few recommendations (which are yet to be implemented), TRAI has proposed the way forward. It is upto us to make most of it. Though TRAI’s reforms mayn’t be revolutionary; it helped entire industry to reach at this mature stage. But operators are pulling Regulator’s legs as if the whole issue pertaining to telecom India was due to few set of proposed recommendations.
Telcos need better thinking and better ways to increase revenue resources. Regulator alone can’t be at fault, neither its recommendations!
