Mobile telecom industry profits may dip due to stringent norms: COAI

Mobile telecom industry profits may dip due to stringent norms: COAI

Hyderabad: Cellular Operators Association of India (COAI) on Wednesday indicated that profits of mobile telecom industry may shrink further on account of strict subscriber verification norms and levy of charges on erection of cell towers by the state governments.

Lack of infrastructure facilities in rural areas coupled with stringent norms of customer verification before providing services is a deterrent for mobile penetration in most parts of the country, COIA director-general Rajan S Mathews said.

Operators spend crores of rupees on customer verification process. Right now, activating one customer includes a minimum expense of 600-700. Also, the state governments have started levying taxes on cell tower.

In Delhi, till recently they (state government) were charging 50,000 per tower. It has now further been enhanced to 5 lakh.

These are going to kill our profitability, Mathews told PTI.

Some telecom operators are already incurring losses and the situation may further deteriorate with the new development, he said.

“Net margins are currently at 8-10%. This may drop by 2-3%. Some operators are already in negative," Matthews said.

With the exception of a few companies, most of the operators reported dip in the net in Q2 this fiscal when compared to last year.

Bharti Airtel Ltd, India’s largest mobile-phone operator, reported a 27% dip in net profit to 1,660-crore in the second quarter earnings.

Similarly, Tata Teleservices Maharashtra Ltd’s net profit of 97 crore for the second quarter showed a decline of nine percent, compared to the 107.9 crore net profit it earned in the corresponding period last year.