Uninor’s success spells trouble for incumbents

Uninor’s success spells trouble for incumbents
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First Published: Wed, Jan 13 2010. 11 14 PM IST

Updated: Wed, Jan 13 2010. 11 14 PM IST
Uninor, the brand under which the joint venture between Unitech Wireless Ltd and Telenor ASA launched cellular operations in India, has done rather well, adding 1.2 million subscribers in December, its first month of operations. And that too with operations in just eight circles, one of which was launched towards the end of December. According to a report by Anand Rathi Research, this implies a share of 13% of total net adds in the eight circles it operates in. This is based on the entire industry’s net adds in November, since complete numbers for December are still not available.
One of the factors for the relatively high share in net adds in its very first month of operations is the company’s extensive marketing and distribution reach in the eight circles.
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The other major factor, according to an analyst, is that the company’s local call rate of 29p/minute may have been misleading for some subscribers. While the call rate seems very attractive at first because it is far cheaper than the market average of around 50p/minute, there is, say analysts, a hidden cost with Uninor’s plans. Depending on the plan subscribers are in, there’s either a call set-up charge of 39p or a daily rental of Rs2. While these plans will suit frequent callers as well as those who make long calls, there is an element of cost which is not readily apparent.
Having said that, Uninor’s launch has further increased capacity in the telecom space and the worry for incumbents has far from abated. With Uninor and TataDoCoMo still to complete their nation-wide rollouts and Etisalat still to launch services, the decline can be expected to continue. Number portability is expected to worsen matters, as a far higher degree of subscribers will be willing to switch service providers. HSBC Research in a recent report points out that it expects another round of tariff cuts once number portability is implemented.
Meanwhile, shares of Bharti Airtel Ltd have moved around 16% higher compared with its lows of Rs275 in end-November. As HSBC’s analysts point out, the recent strength in telecom shares is likely to be short-lived. After all, the full extent of the downside in tariffs is yet to be seen.
Write to us at marktomarket@livemint.com
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First Published: Wed, Jan 13 2010. 11 14 PM IST
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