Business - India;Bumpy road ahead for new telecom players

Anandita Singh Mankotia

Despite the Indian telecom market adding the largest number of subscribers each month to emerge as the world’s fastest growing market, a detailed study of its parameters reveal that while the going is good for the established players, it is indeed going to be a very tough job for the new players, rolling out Greenfield networks to sustain themselves in this market. New licensees like Swan, Unitech and Datacom, which plan to roll out networks will find the current business model not yielding them much vis-à-vis the investments required.

This can best be illustrated with the case of the country’s fifth largest cellular operator, the AV Birla group’s Idea Cellular. The company started operations in the Mumbai circle in August and till October-end has been able to add only 1.7 lakh subscribers. This when the company has a large employee base of its group companies to take into its fold. Idea can still afford to garner subscribers at a slow pace since it has a total user base of 35 million with operations in 13 out of the 23 telecom circles.

Another telco, the CDMA operator, Tata Teleservices Maharashtra Ltd (TTML), a subsidiary of Tata Teleservices Ltd (TTSL), the country’s sixth largest telecom operator too hasn’t been reaping the gains of the world’s most lucrative telecom market yet. It has been declaring losses for the past seven years. TTML’s net loss for the second quarter ended September 30 stood at Rs 47.35 crore. The company recently offloaded a 26% to the Japanese telecom giant NTT DoCoMo.

Pointing to the rough ride in store for the new operators, Romal Shetty of KPMG says, “It is going to be really difficult to display a Bharti, Vodafone or Reliance sort of a business for the newer entrants in ordinary course of business. The only way which seems possible is by increasing the share of their revenue from the value added services to up to 25% like in South Korea and Japan and secondly provide excellent customer services”. Value added services currently constitute up to 15% of the total revenue of the telecom players.

However, Akhil Gupta, deputy CEO, Bharti Enterprises said that no model can be successful in India without the voice.

Falling average realisation per user (ARPU) are only going to add to the woes of the new players. Existing telecom players have a pan-India presence and network, while the new players such as Swan either have licence only for a few circles and even if they have a pan-India licence like Unitech wireless, they would not be able to begin operations in all the circles simultaneously, which indicates a staggered or a phased launch. Meanwhile the existing players already have established networks and let alone weaning subscribers away from the big players the new ones are going to face an up hill task even attracting new users given their limited reach.

Even mobile number portability (MNP) will not help the new entrants much as due to their limited reach, their proposition would not be attractive to the customers, feel analysts.