The operating profits of large telecom companies are forecast to rise 20 per cent over the next two years. This is twice the operating profit of about 10 per cent per annum posted by the operators in the last five years, according to a study by Crisil.
“Half of this increase would be due to tariff increases, whereas the other half would be contributed by increased data and value added services (VAS),” the study added.
“Our estimates show there is still a 50 per cent gap between headline tariffs and average revenue per minute (ARPM) due to discounted call rates offered to many subscribers. With competitive intensity easing, telecom companies are in a better position to reduce the discounts and crunch the gap,” said Crisil Ratings Senior Director Sudip Sural.
This will contribute about half of the rise in operating profits, he added.
Revenue contribution from data and VAS could touch 20 per cent in the medium term from 16 per cent in the last fiscal. This is because large telecom players are seeing data usage more than doubling in the first half of this fiscal from the year ago period.
This trend is expected to continue following a near doubling of smartphone sales over the last financial year and higher 3G penetration due to reduction in 3G prices. This will contribute to the balance increase in operating profits, it said.