At 15 million user additions per month, subscriber growth in the country continues unabated. But this has ceased to be a guarantee of good financial health for service providers.Rising competition (with 13 licensees per circle), falling tariffs (with the per-second billing eroding tariffs further), rapidly declining average revenue per user (ARPU) and minutes of usage (MoUs), and high taxes (about 30 per cent) have not reflected well in the financial books of telecom operators in the quarter ended September 2009.
Idea Cellular was the first among the operators to announce its quarterly results. The Aditya Birla group company reported a 26 per cent sequential drop in consolidated net profit. According to a company statement, “The bubble days of 2007-08 had blurred the distinction between the real and the fanciful in the Indian mobile sector. The resultant overcapacity has manifested in tariffs unrelated to economics. Market prices have plumbed depths which predicates that the market itself will eventually work the overcapacity out of the sector.”
Signs of real trouble came when the country’s two largest telecom operators, Bharti Airtel and Reliance Communications (RCOM), announced their quarterly financials. Bharti Airtel reported its slowest profit growth in six years.Perhaps for the first time, the company gave a cautious warning on the future, with Bharti Group Deputy CEO Akhil Gupta saying it might face a short-term impact on profit growth: “With this competitive intensity and irrational pricing in some pockets, it is possible that in the short term we could see some impact on profit growth.”
RCOM also reiterated that there is more fall ahead. The dual-technology operator posted a 52 per cent year-on-year decline in net profits from Rs 15.3 billion to Rs 7.4 billion. Public sector operator MTNL, too reported a decrease in net profit on a year-on-year basis.
The sluggish financial results of telecom operators have brought into focus a key phenomenon of dual SIMs ?? existing subscribers are acquiring additional connections, resulting in a seeming increase in subscribers but in fact, merely leading to a bill being split between two or more service providers.
If this issue, along with others like intensifying competition leading to falling tariffs and high telecom levies, is not addressed soon, telecom operators, who, ironically, showed no signs of slowing down during the global financial meltdown, may have to face serious consequences in future.
Meanwhile, other listed telecom firms including Tata Communications, Sterlite Technologies and Net4India have reported falling revenues. Exceptions have been GTL Infrastructure and GTL Limited, which reported positive results.
The following is a compilation of the financial results of key listed telecom companies…
