It seems that Tata might have started another rate war in India....
financialexpress.com
Low tariffs could sink telcos
The Indian Express
PRAGYA SINGH
Posted online: Monday, November 07, 2005 at 1113 hours IST
Updated: Monday, November 07, 2005 at 1538 hours IST
NEW DELHI, NOVEMBER 7: Through an open war over tariffs and subscribers the telecom players, busy with steep expansion and investment plans since early this year, may just have dialled D-for doom for themselves and more importantly, for you too.
Tata Teleservices’ new tariff plan ‘Non-Stop Mobile’, which offers a mobile connection for two years at zero price except the handset, has been pegged as potentially ‘‘destructive’’ to the telecom industry by a new industry report.
According to Bric Securities, an equity analysis firm, Tata’s new offer could ‘‘throw all current calculations on profits out of gear.’’ Here is why: In the worst-case scenario, Non-Stop Mobile could push Tata’s average revenue per user (ARPU) down to $1.5 per month —sharply below today’s industry ARPU of $7-$9 that operators find barely sustainable.
Service providers who compete at such ARPUs will need deep pockets — more than low tariffs, quality service or a countrywide network that operators hanker for, finds the report, which is also rather sceptical on local mergers and acquisitions.
TTSL’s new scheme is already pushing operators into cutting tariffs competitively, but those cuts may turn permanent — and unsustainable —for firms without massive cash reserves. ‘‘BSNL is already putting up a total capacity of 82 million new wireless subs. If it was to get into a price war...these cuts could become more permanent,’’ Bric says.
The report says if TTSL’s new plan is successful, it will rake in subscribers by hordes — a likely motive considering it is in 20 of 23 circles but with only 5.2 million subscribers. Besides, Tata’s capex is not expected to jump, considering it has a capacity to service over 10 million subscribers.
Instead, the Bric report expects tariff pressure to take a toll on more profitable value-added services and even rentals (including caller-line identification), across the industry. It adds, ‘‘In this context, note the competitive action by the Tatas, who have invested $4 billion in their telecom business, but not succeeded in building a high enough market share.’’
There is, however, a big if to the entire ‘‘destructive’’ fall-out: Non-Stop Mobile must be successful for any of this to happen. BRIC raises some questions over Tata’s own ability to sustain its new scheme. For now, outgoing calls on the Tata network are already ‘‘over 60 per cent cheaper than those of its competitors,’’ by way of its 1-second pulse and lower calling rates.
Today, for customers making outgoing calls of about 10 minutes a month, TTSL’s charges are already about 90 per cent lower than other operators. Even for customers with 100 outgoing minutes, its charges are 45 per cent lower.
In any case, says the report, the TTSL plan could result in massive customer additions, and is aimed at lower-end users who make fewer calls. |
