Solutions

Intense competition and global downturn has started taking its toll on

revenues of telecom companies in India. Indian telcos, which have shown benefits

of the outsourcing model to players in emerging markets, cannot be isolated

during the global meltdown. The ongoing liquidity crunch has already forced

several telcos to take a re-look at their 3G spectrum bidding strategies.

Data released by the Telecom Regulatory Authority of India shows that ARPU of

telecom firms has plummeted in the first two quarters of 2008. Gross revenue has

also declined by 1.3% due to poor performance of state-run telcos. Competition

among operators led to decline in ARPU. ARPU for GSM players declined by 9.8%

from Rs 264 in March 2008 to Rs 239 in June 2008, while ARPU for CDMA operators

dropped by 12.6% from Rs 159 to Rs 139.

The net profit of Idea Cellular was down by 45.23% during the second quarter

of fiscal 2009. Revenues were marginally up by 5.75%. Higher operating expenses

including steep personnel costs, network operating expenses, and advertising and

promotion spends primarily affected profitability. Wage hike has also

contributed significantly. Expansion in Mumbai, Bihar, Orissa and Tamil Nadu

circles has resulted in higher networking expenses.

Despite the recession, operators are gearing up to launch their services in

new locations and more than half of the new subscriber additions are coming from

rural areas where scope for better ARPU is bleak for the time being. Launch of

services in new locations means increase in operating expenses. First, the new

circles will incur higher costs to improve operators' distribution network.

These expenses contribute to higher promotion and subscriber acquisition costs.

New operators are trying to find innovative ways to mop up customers and

boost revenue streams. Public sector operators are getting feelers from new

players to share their network, among other things. Sharing of infrastructure

will boost the topline and bottomline of both existing and new operators. In

order to maintain the financial health of operators, the government can announce

more incentives for sharing and utilizing green technology options.

Cost and RoI is driving telcos to evaluate their OSS/BSS strategy. Telcos are

looking to reduce investment and maintenance on separate voice and data

networks, and unify communications by delivering voice, data, e-commerce and

content over a hybrid network. It is imperative that telcos start thinking about

billing platforms as an investment. They should also identify the negative cost

impact that legacy systems and fragmented business processes have on the

organization.

Indian telcos grew in a cost sensitive market. Some of the operators are

still waiting to see the peak of the downturn. They want telecom equipment

prices to come down further. They want to bargain hard. The new initiatives will

see the light of day if the government can support new and existing players in

the current situation.

Baburajan K



baburajank@cybermedia.co.in