Telecom services industry growth slows to 2.5%

The telecom services industry posted a meagre growth rate of 2.5 per cent in revenues at Rs 1,59,510 crore (Rs 1,595.1 billion) in 2009-10 due to intense domestic tariff war, says a survey by telecom industry journal Voice & Data.

The industry had seen a robust growth of 20 per cent in revenues at Rs 1,55,683 crore (Rs 1,556.83 billion) in 2008-09.

The survey said these telecom services revenue include revenue from cellular, fixed line, ntional long distance, international long distance, broadband, VSAT and Radio Trunking businesses.

Intense tariff war caused the steep fall and overall slowdown in performance across segments, including cellular services that have been leading the telecom services sector growth in the past several years, Voice & Data said in a statement.

Despite a near 50 per cent subscriber growth, the mobile services segment grew a meagre 3.6 per cent to Rs 96,860 crore (Rs 968.6 billion) from Rs 93,522 crore (Rs 935.22 billion).

Tariff cuts and introduction of 1 paisa per second calling introduced by new players forced leading players to cut rates.

The cellular services market that grew at 36.4 per cent just two years ago, thus providing momentum to the Indian telecom revolution, is now set for exciting times, it said.

Thanks to the mobile telephony revolution, one in every two Indians owns a mobile phone.

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

The subscriber base for fixed line in the country is languishing at 36.96 million. The study expects competition to become more intense with 14 active mobile players trying every trick in the trade to stave off negative growth.

Though most top cities have statistically achieved near 100 per cent mobile penetration, it is estimated that nearly 20 per cent of the mobile subscribers are inactive.

It was found that in 2009-10 nearly three-fifths of the new additions came from rural areas and it is expected new customers in future would come mostly from rural markets. For the fixed line phone business, 2009-10 was another year of negative growth with revenues dropping by nearly a quarter (23.3 per cent) to Rs 18,900 crore (Rs 189 billion).

While top three fixed line players Bharat Sanchar Nigam Limited, Mahanagar Telephone Nigam Limited and Bharti Airtel reported a revenue decline, others like Reliance Communications, TTSL and TTML posted growth in revenues.

The International Long Distance segment posted a 17.3 per cent growth to touch revenue of Rs 17,600 crore (Rs 176 billion), it said.

The ILD segment grew as telecom operators increased their presence in foreign markets, bringing in additional ILD revenue for domestic operators.

With falling rates, there has been a substantial growth of inbound voice traffic into India.

The National Long Distance market too bore the brunt of the price war as it recorded revenues of Rs 16,400 crore (Rs 164 billion), a growth of 13.6 per cent in 2009-10 against 48 per cent in 2008-09.

Broadband, fifth largest segment of the telecom services space, posted revenues of Rs 9,000 crore (Rs 90 billion) recording a 20 per cent growth over last year, the study said.

Bharti Airtel retained its position for the second consecutive year by posting a five per cent growth to end the fiscal with revenues of Rs 38,800 crore (Rs 388 billion).

Vodafone recorded the highest growth of 13.7 per cent and was among the top five players to emerge as the third largest, with revenues of Rs 23,200 crore (Rs 232 billion), a position earlier held by Reliance Communications.

Reporting a negative growth of 3.5 per cent, RCom was at number four with revenues of Rs 22,130 crore (Rs 221.3 billion).

State-run BSNL saw a drop in revenue for the second consecutive year to end the year with Rs 30,240 crore (Rs 302.4 billion), a drop of 14 per cent, though the companys mobile subscriber base grew by a third to touch 70 million.

Idea Cellular, Tata Communications and Tata Teleservices retained their slots at number five, six and seven with revenues of Rs 11,390 crore (Rs 113.9 billion), Rs 11,000 crore (Rs 110 billion) and Rs 6,900 crore (Rs 69 billion), respectively, the study said.

It said the next 12-18 months are likely to be very challenging for service providers. Competition for market share was likely to grow at a scorching pace leading to shrinkage of margins.

Big investments in acquiring 3G and BWA spectrum have already sent operators back to the drawing board.

Rollout of 3G services too will need heavy investments in equipment, it said.

To survive, players would have no option but to come out with innovative plans across the board, network rollout and management, customer acquisition and range and quality of services, the survey said.

The other big hurdle that can come in the way of telecom growth is the restrictions on telecom operators on purchase of equipment from Chinese vendors, it said.