DoT projects flat earnings from licence, spectrum fees this fiscal

DoT projects flat earnings from licence, spectrum fees this fiscal
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First Published: Thu, Feb 11 2010. 11 18 PM IST

Graphics: Paras Jain / Mint
Graphics: Paras Jain / Mint
Updated: Thu, Feb 11 2010. 11 18 PM IST
New Delhi: The department of telecommunications (DoT) expects a 4-5% growth in earnings from fees from telecom companies in the fiscal year to 31 March, less than half the 11.6% growth in the previous fiscal.
“The earnings for the (October-December) quarter from licence fees have gone down by Rs40-50 crore over the same quarter the previous year,” a DoT official said. “We were expecting a bigger fall (in earnings growth), but the launch of services by some of the new licence holders has led to some relief.”
Earnings growth have been falling steadily from the 29.5% registered in the 2007-08 fiscal year, another official said. In 2009-10, the rate of growth is expected to decelerate to 4-5% over last year’s earnings of Rs13,000 crore, he added.
Both officials spoke on condition of anonymity.
The officials attributed the sharp fall in growth to the disconnection of nearly 20 million mobile handsets that had no international identification numbers, a three-month ban on the sale of prepaid mobile phone connections in Jammu and Kashmir and a nasty tariff war among operators.
Graphics: Paras Jain / Mint
DoT’s freeze on the allocation of additional radio spectrum to telecom companies also hurt revenue growth, offsetting record increases of at least 15 million new mobile phone connections every month.
India’s telecom service providers pay 6-10% of their adjusted gross revenue (AGR) as licence fee to DoT, and another 2-6% of AGR as spectrum usage charge, which varies on the amount of spectrum that each operator has in various operating areas.
The combined revenue of telecom companies rose by 4% for the three months ended December—after falling for two consecutive quarters, the first fall in the sector’s revenues in the past five years, Telecom Regulatory Authority of India (Trai) data shows.
The industry’s AGR grew to Rs39,756 crore in the December quarter, boosted by recovery in earnings from mobile and landline services that had been sliding for the previous six months.
Trai data also shows India’s two largest operators by revenue, Bharti Airtel Ltd and Bharat Sanchar Nigam Ltd recorded a fall in mobile phone revenues in the quarter ended 31 December over the previous quarter.
The ban on sale of prepaid mobile phone connections in Jammu and Kashmir, imposed in November and revoked on 20 January, was due to security concerns.
As was the 1 December prohibition on use of handsets with fake or no international mobile equipment identification (IMEI) numbers, which are unique sets of 14-16-digit numbers embedded by manufacturers on every mobile handset.
Tariff wars were launched by operators who wanted to corner a greater share of the subscriber market before the implementation of mobile number portability, which allows users to retain their numbers even if they switch operators.
“There have been tariff wars before,” the first official quoted above said. “But this time, the growth in revenues has fallen, which has not happened before.”
“There is lower price elasticity in the market at these price levels, which have led to many of the telcos taking a hit on their margins,” said a Mumbai-based analyst working with an international brokerage. He declined to be named as he is not authorized to speak with the media.
The freeze on allocation of additional spectrum also meant the operators were paying for the same amount of spectrum as they did the previous year, hurting growth, the second official said.
India’s telecom market is the second largest in the world after China and the fastest growing.
The country ended 2009 with 525.15 million mobile subscribers, after adding 19.10 million mobile phones in December.
“While new launches have gained revenue share at the expense of incumbents, who were initially reluctant to cut tariffs, all of them have now matched the lower tariffs of the new competitors,” said a 10 Februaryreport by Rahul Singh and Gaurav Malhotra, analysts with Citi Investment, the research arm of Citigroup Inc.
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First Published: Thu, Feb 11 2010. 11 18 PM IST
More Topics: DoT | Telecom | Spectrum | Bharti Airtel | BSNL |