“We believe tarriffs, which are already the lowest in the world, may not be sustainable for smaller players. It is evident that the fully-integrated players will continue to remain stronger,” Satish Seth, group managing director, Reliance Communications, said at an analyst conference call.
“If they have to quickly increase their market share, newer companies will have to practically go free, which is not possible. Companies will struggle more if they have to compete with Idea, Airtel and Vodafone,” said Vaibhav Agarwal, vice-president, research, Angel Broking. While new companies are struggling, losses are mounting. In the second quarter, Sistema Shyam posted a net loss of Rs 493 crore, which is more than three times its last year loss of Rs 106 crore. Also, Uninor reported a net loss of Rs 850 crore. These companies are yet to achieve breakeven, which is years away. Reeling under losses, these companies have a few options to sustain their businesses. “There has been a lot of equity-value destruction in the Indian telecom market. Vodafone has written-off the value of its Indian assets and Telenor shareholders are asking it to quit India. There is very less foreign interest in India,” said Alok Shende, principal analyst, Ascentius Consulting. Under the present regulations, spectrum cannot be transferred as an asset in an acquisition. And, as these newer companies have not built a huge subscriber base, there are no assets to buy even if domestic companies were interested. However, Mrityunjay Kapoor, country-head, Protiviti India, said mobile number portability (MNP) could give an opportunity for newer companies to get a substantial market share. “There will be a churn among most people – who are high-value customers – to operators that can promise better service. If new operators can differentiate themselves in terms of service quality, MNP will provide an attraction to switch,” he added. | |||||||||||||||||||||||||||||||||||||||||
Sunday, September 26, 2010
Losses push new telcos towards bailout: BS
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