SD Saxena, former director (Finance), BSNL, said that 3G will bring in new technologies and products into the markets, but tariffs may not come down in the near future.
"I would say that the industry is very bullish 3G and prices of per-line additions are decreasing. There is a shift in pattern from Average Revenue Per Users (ARPUs) to Minute of Usage (MOU)," he said. "The 3G spectrum price sought is a capital investment. Therefore, companies may still think about it because the government might have valued it based on all the other parameters."
Harit Shah, research analyst, Angel Broking, said that there many not be many foreign participants in 3G auctions. "We have to hypothetically assume that the price was doubled. Operators would accordingly factor that in into their bids. In any case, we are not expecting too many foreign operators to participate, given that the conditions are not favourable for them."
He did see new players making a profit in 3-5 years and expected a 20-25% profit growth for telecom companies in 2-3 years. "When you have about 10-12 operators competing per circle, it is clearly not sustainable for some players. It's not going to be profitable and this is going to be the case for newer operators. We don't see how it's going to be possible for them to make profits for at least the next 3-5years, even considering the sharing of infrastructure between the operators."
Quicktakes
All eyes on 3G
Auction to be held on January 30, delayed for two weeks on cabinet intervention
Department of Telecom (DoT) clarified foreign companies have 90 days from the close of auction to get all approvals
Finance Ministry asked DoT to double the price of 3G and wireless broadband spectrum
If the ministry's proposal is accepted, bids for pan-india 3 G spectrum will start at Rs 4,040 crore
Govt to rake in at least Rs 28,280 cr from 3G spectrum auction
Analyst says finance ministry proposal would further reduce interest in 3G auction
DoT plans to allow a maximum of five players per circle for 3G service
Macroscope
India, with 325 million subscribers, is the second-largest mobile market in the world, next only to China
India adding 9 million subscribers per month vs 1.5 million and 8.5 million per month in the US and China
Wireless penetration at 25.2%, teledensity at about 29%
On an average, there are 7-8 competitors per market
Top four operators continue to account for more than 70% share in total net additions
Rural mobile penetration at 9.5% vs over 60% penetration in urban areas
Rural subscriber base set to reach 250 million by March 2012, accounting for 40% subscriber base
Tackling slowdown
Relying on value-added services to maintain Average Revenue Per User (ARPU)
China unveiled sweeping industry reshuffle via merger and acquisition
China's full-service operators, China Unicom and China Telecom, became China Mobile
Lower per capita Gross Domestic Product implies lower average income per capital
This led to lower subscriber growth and lower ARPUs
No longer defensive
Asian telecom stocks are no longer a surefire defensive play for these financially turbulent times
Analysts say telecom sector in China and India expected to see short-term pain
Asian telecom will see pain in the short term as gloomy economic outlook stretches into 2009
Japan's NTT DoCoMo and SK Telecom expected to struggle for more revenues
Telecom firms battling with lower ARPU and slowing subscriber growth
ARPU is a key performance indicator for telecoms firms
Growth has tapered down in single digit on financial crisis
Regulatory concerns
Challenging fiscal position may lead to higher taxes for telecom sector
2G Spectrum usage charges may be hiked
DoT sets reserve price for 3G spectrum at Rs 2,020 cr vs TRAI recommendation of Rs 1,050 crore
Propensity to allocate start-up spectrum to new entrants is a negative for incumbents
Lack of clarity on rules for the upcoming 3G/WiMAX spectrum auctions
ARPU trend
Q2 FY09 Q1FY09 Q4FY08
Bharti Rs 331 Rs 350 Rs 350
Idea Rs 259 Rs 278 Rs 287
RCom Rs 271 Rs 282 RS 317
(Fig in paise)
Q2 FY09 Q1FY09 Q4FY08
Bharti 0.63 0.66 0.70
Idea 0.62 0.65 0.70
RCom 0.64 0.67 0.74
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