Reliance Comm sees India telecom consolidation

Reliance Comm sees India telecom consolidation

New Delhi: Intensifying competition in the Indian telecom sector, the world’s fastest growing in mobile sign ups, should kick off an industry consolidation in two years, a senior official at Reliance Communications said.

With four firms, including ventures of Norway’s Telenor and United Arab Emirates’ Etisalat, set to start operations in India this year, existing players led by Reliance and Bharti Airtel have slashed call charges to lure users.

India, which has 11 mobile operators, has this year added an average 14 million mobile users a month. Analysts say still there is huge potential as only 40 people of every 100 own mobile phones from a population of more than a billion.

Call rates in India have dropped to less than 1 US cent per minute, the world’s cheapest, squeezing profit margins of companies.

Satish Seth, group managing director at Reliance Communications’ parent, told analysts in a conference call on Monday the competitive activity will only increase in the near term.

“The overhang of these developments will accelerate the process of industry consolidation in the next 18-24 months," he said.

Reliance Communications on Saturday reported its quarterly profit halved, on foreign exchange losses, network expansion costs and growing low-paying users.

EBITDA margin, a key gauge of profitability, for the wireless business fell to 32.7% for the three months to September from 38.6% in the preceding quarter.

In response to a question whether the company expects wireless EBITDA margin to improve in the December quarter, Seth said: “The outlook is positive."

Reliance Communications, which had 86.1 million wireless users at end-September, saw key metrics such as average revenue per user (ARPU) falling to Rs161 ($3.4) for the September quarter from Rs210 in the preceding quarter and sharply off Rs244 for the financial year ended March.

In October, the company cut all call charges to a flat 50 paise (1 US cent) a minute, as rivals such as Tata Teleservices added more subscribers than market leaders during the September quarter with a new per-second bill plan.

“Per-second billing is another option we have evaluated internally," Seth said. “We are keeping all our other options open."

Bigger rival Bharti Airtel last week launched a per-second billing plan.