Tariff wars eat into revenues, telecom industry grew 2.5 percent

NEW DELHI - Tariff wars ate into the revenues of telecom operators in 2009-10, with the industry logging only a modest 2.5 percent growth, having grown even in the year of the financial crisis at 20 percent, according to a survey.

“Intense tariff war caused the steep fall and overall slowdown in the performance in all segments, including cellular services that over the past several years have been leading the growth in earnings for the telecom services sector,” said a report by industry journal Voice & Data.

The telecom services industry, bowed to internal competitive forces in 2009-10, slowing its pace of growth to 2.5 percent, to post revenues of Rs.159,510 crore against the previous year’s earnings of Rs.155,683 crore, the report added.

The revenue figure includes income from cellular, fixed line, national long distance (NLD), international long distance (ILD), broadband, VSAT and radio trunking businesses.

Tariff cuts and introduction of one paisa per second call rates introduced by the new players forced the leading operators to bring down charges.

Though the number of subscribers grew about 50 percent, the mobile services segment revenues rose only 3.6 percent to 96,860 crore.

Nearly three-fifths of the new additions came from rural areas, as most top cities have statistically achieved almost a 100 percent mobile penetration.

Three mobile operators- Bharti, Reliance and Vodafone- now boast of a subscriber base of over 100 million each.

However, the subscriber base for fixed line in the country is languishing at 36.96 million, with the number of users falling by 23.3 percent in 2009-10 and revenues slipping to Rs.18,900 crore.

“This is the worst telecom services revenue growth in the last five years. More tariff wars are not sustainable. There is likely to be consolidation ahead which should arrest more tariff wars and revenue attrition,” said Prasanto K. Roy, chief editor, CyberMedia India.

“The 3G rollout and rising broadband penetration, including wireless broadband, will help improve service revenue, but the impact of these will be felt more in fiscal 2011-12 than in this year,” Roy said.