The Government’s plans to abolish roaming charges could result in telecom operators hiking tariffs to mitigate the impact on profitability.
On Monday, Telecom Minister Kapil Sibal reiterated the Ministry’s plans to do away with roaming charges by 2013, which were also part of the National Telecom Policy (NTP) 2012.
“I believe that the companies will have to hike tariffs to recoup some of the losses. Operators’ revenues are likely to take a hit, as apart from roaming charges, revenues also come in from interconnect user charges,” said Ankita Somani, sector analyst with Angel Broking.
Falling ARPUs
The industry is already bogged down by numerous problems such as falling average revenues per user (ARPU), flat average revenue per minute (ARPM) and the impending cost of 2G spectrum, among others. “Additionally, there could be the overhang of spectrum re-farming and the 2G auction,” Somani said, adding that the losses to the operators would depend on the prices they pay for 2G spectrum in the upcoming auctions.
ARPUs, a metric to gauge the financial health of a telecom company, have been declining constantly over the past five years (except in the quarters ended December and March). The industry believes it is likely to be under pressure for the rest of the year. Similarly, the ARPM (a metric to gauge usage pattern) of major telecom companies has been flat at about 43-44 paise for the last couple of years.
Global roaming
“There will definitely be a tariff revision upwards. More than voice, we feel that data and broadband will help improve the bottomline for telecom companies. The telecom space is extremely crowded, so some sort of consolidation will take place. This will result in fewer operators,” said Gaurang Shah, assistant vice-president, BNP Geojit Paribas. The brokerage is positive on Bharti Airtel and Idea Cellular.
According to V.V. R Kishore, vice-president (Engineering and Head–India Operations) Roamware Inc, a mobile solutions provider, “While some of the impact could be minimised by increased usage of services, additional initiatives need to be looked at, to shore up revenues and profitability. Operators should look forward to the international roaming segment which is a growth area with over 15 million outbound travellers from India and around eight million inbound travellers.”
Telecom operators, when contacted, said they were “evaluating” the situation and could not comment at this juncture.