Five trends PwC predicted for Indian telecoms in 2013
Slowdown in subscriber growth
Subscriber numbers de-grew at the end of 2012 due to new customer information regulations which forced millions of disconnections, but even in 2013 the subscriber base will grow by only 5 per cent, compared to 19 per cent in 2011 and over 40 per cent in 2010.
The network comes back to life
Capex is estimated to shoot up by 40 per cent this year compared to the doldrums of 2012, but capex/sales are still low at 12 per cent. This is way below the 20 per cent to be expected for a country where network roll out is still underway.
Focus on return on capital
Despite capex constraints and debt reduction the industry is still relentlessly pursuing growth. Return on invested capital increased from around 3 per cent last year to forecast 5 per cent this year. EBITDA margins are at 29.5 per cent, approaching the emerging Asia average of 35 per cent.
Excite the customer
The industry is moving slowly, partly due to a lack of investment but also due to the challenges of executing difficult strategies to combine innovation, technology and business transformation. This is going to be a multi-year journey.
Litigation, litigation
From 3G roaming to arbitrary penalties and fines, sometimes in 10 year old cases, all fuelled uncertainty for operators. For 2014 PwC forecasts positive steps to streamline the regulatory and legal landscape.
2014 will see a restoration of vitality in the sector, especially in the second half
Data hungry Indians!
Data consumption should grow across 2G, 3G, fixed broadband and 4G. Wi-Fi rollouts by major operators may facilitate growth. Challenges remain with introducing localised content en masse, but with smart phone penetration rising and network quality set to improve, many of the requirements for data growth is being met.
Year of Social Media, Analytics and Cloud
Operators will attempt to integrate services more closely with social platforms, and start introducing advanced analytics through Big Data to get a 360 degree understanding of customer behaviour. Enterprise players could increase focus on collaborating for solutions in Healthcare, Logistics and Financial Services though we see this as a two to three year play. 2014 will see the beginnings of a long journey in SMAC.
Put the money where the network is
With new revenue growth to come from rural voice and customers demanding better quality, network expansion and upgrade will pick up. Several operators have announced investment plans, some will buy spectrum in the auctions of early 2014, and we may even see LTE trials in the liberalised 1800 MHz band. PwC?s recent customer value survey shows that 52 per cent of users regard the network as more important to their mobile experience than the handset (even though only 11 per cent have network as top of mind recall).
Regulatory mist to lift
Some uncertainty will always remain but Indian regulators are introducing more clarity on spectrum pricing for the upcoming auctions, and attempting the same on spectrum trading, usage charges, re-farming and M&A. Whilst we may not expect any more new entrants, additional clarity may bring new investments and action into the sector. However, we must hope that regulation won?t stifle new growth, for example in M2M.
Game of circles
With licenses coming up for extension and more liberal M&A guidelines expected soon, in 2014 we see the prospect of some operators buying stakes in other players across numerous circles. This industry has an appetite for three to five national players and a small number of regional players and we may see initial action in this space following the general elections.
