End of Mobile Tariff War from New Operators

[ichetan]

Post the tariff war ignition in the Indian mobility space in October ’09, contribution to revenues from incremental volume growth has been marginal. The steep reduction in
mobility tariffs was not supported by rising paid minutes as incremental minutes earned <30% of the current tariffs versus the historical range of 60-70%. As financing for incumbents has dried up, they have stayed away from further tariff based competition.

voice minute volume growth to stabilise at a lower growth of ~10% in FY11- 14E as volume MoU elasticity weakens with growth coming in from marginal usage subscriber addition from rural areas.

With mature subscribers hitting the ceiling in terms of usage, players realise that incremental volume growth is low. Indian subscribers currently have among the
highest usages globally and we expect, MoUs to decline as incremental growth in rural areas is at low usage rates. [AT&T in US has 644 Mins / Month / Subscriber Usage while its is 449 Mins / Sub / Month for Airtel in India]

Finally, note that new players continue to lag significantly in revenue market share as their subscriber base is largely non-primary SIM holders and they attract the deal seeking subscriber. Thus this brings to an end an era of Aggressive Telecom Tariff War that began in 2009.

[ichetan]

Also one should note that New Operators - Uninor MD is in Jail. So are Etisalat DB and Reliance Telecom officials along with the Telecom Minister for the Massive Fraud. Banks have been advised by the RBI to secure Spectrum and Hypotheicate it on an emergency basis to protect from any systemic risks.

Meagre revenue market share and lack of growth triggers such as 3G and slower roll out will make these operations further unviable. Ongoing parliamentary enquiry into spectrum allotment to new entrants remains a concern and any adverse finding may lead to withdrawal of licences.