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Intense competition can erode profitability of telcos: Kotak

Intense competition can erode profitability of telcos: Kotak
PTI
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First Published: Mon, Mar 16 2009. 04 16 PM IST
Updated: Mon, Mar 16 2009. 04 16 PM IST
New Delhi: New and existing telecom operators currently in pan-Indian expansion mode may see their profitability taking a hit as competition intensifies among them, leading to high capex and network costs, according to a report.
“We expect the high capex, network opex and subscriber acquisition costs to weigh heavily on the margins of telcos expanding pan-India (Idea, Vodafone and Aircel), on alternative technology (RCom, Tata Tele, BSNL and MTNL) or launching fresh operations (Unitech, Datacom, Shyam, Loop, Swan, STel),” Kotak Securities said in a report.
The analyst firm said the strategic interests of established global telcos like Vodafone, NTT DoCoMo, SingTel, Telecom Malaysia, Maxis, Sistema, Telenor, Etisalat and Batelco and further entry through 2G/3G/WIMax/MVNO routes may intensify competitive forces and weed out extraordinary profits from the sector.
The report said the sector is fairly immune to the current economic slowdown.
“Increasing wireless penetration is expected to keep the near term volume growth robust while 3G/broadband adoption would ensure long term growth momentum,” the report said.
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First Published: Mon, Mar 16 2009. 04 16 PM IST
More Topics: Telecom | Kotak | Idea | Vodafone | Aircel |