MTS India targets 30 million users in next 3 years

JAYATI GHOSE

Turf war
New Delhi, Oct. 6: Slashing tariff rates to attract customers may backfire for telecom operators, leading to lower earnings over the next few quarters, analysts feel.

New as well as existing mobile operators are offering reduced voice call rates as well as per-second billing options to retain subscribers and attract new ones.

“Reducing voice tariffs would lead to 4-5 per cent fall in overall EBITA margins in the next 6-8 months,” Romal Shetty, a telecom analyst with KPMG, told The Telegraph. (EBITA is earnings before interest, tax and amortisation.)

He said while the objective of these decisions was to retain market share and set up an entry barrier for new operators, it would impact the average revenue per user (ARPU), a key indicator of an operator’s financial soundness. ARPUs of all telecom operators have been dropping steadily to a level below Rs 300.

Industry analysts also expect faster-than-expected tariff decline to squeeze smaller operators and new entrants (Aircel, Tata, Telenor), leading to industry consolidation.

The country has around 12-14 telecom players as opposed to 4-5 players globally. Moreover, when 3G auctions start, more foreign and domestic operators may join the race.

Reliance Communications recently launched the 50 paise tariff plan for all local and national calls to any network. The move was in reaction to Tata DoCoMo’s one-second billing plan and rival Airtel's announcement that it will charge 50 paise a minute for local and national long-distance calls within its own network.

Vodafone Essar is testing the per-second billing option in the Madhya Pradesh circle. Aircel Cellular has also opted for the per-second offer in five circles and is likely to extend it to Delhi soon.

Russian telecom operator Sistema, which offers services under the MTS brand in India, is also likely to choose the per-second billing model to acquire around 30 million users in the next three years. At present, most telecom companies fix the minimum pulse rate at 60 seconds.