After a roller-coaster ride in the previous few quarters, key financial metrics of telecom firms have steadied during the fourth quarter. The key metrics – Average Revenue Per User (ARPU), Average Revenue Per Minute (ARPM) and Minutes of Usage (MoU) – of the top four operators steadied during the fourth quarter ended March 31. “Broadly, there has been some dilution on the numbers side over the last few quarters, and we have seen a bit of volatility both in pricing and minutes. But in the fourth quarter the incumbents have done a decent job of improving the ARPMs, however we remain concerned on the sustainability of these price hikes,” said Rumit Dugar, Director, India TMT Research, at Religare Capital Markets. Telecom companies, over the past two-three years, have been slowly hiking tariffs by withdrawing freebies or marginally tweaking prices, the benefits of which have began to trickle in. However, this did not impact headline tariffs.
“The voice revenue was coming down as there is continued pressure on voice, while the data revenue is on the rise on the back of fall in rates. However, the profitability of the industry is falling, impacted by the high cost of spectrum,” said Rajan S Mathews, Director-General at Cellular Operators’ Association of India (COAI), the industry body representing major telecom players.
Cautious outlook “The quarter was better than expected on account of hardening voice RPM from moderation in competitive intensity. The positives were a rise in voice RPM, fall in churn rates and collapse of challengers’ growth emphasising industry consolidation,” brokerage firm ICICI Securities said in a report. The industry, however, has a cautious outlook for the rest of the year, as it expects profitability to decline with many company gearing up to bid for spectrum in the next round of auctions. “Our view on the sector has been cautious due to large data capex, while data growth has slowed down, which is a concern for the sector. Overall, a little bit of price tweaks is fine but leverage on balance sheets as well as slowdown in data, are reasons for concern,” Religare’s Dugar said. COAI’s Mathews also mirrors this sentiment.
“Operators need to make a lot of investments in spectrum, improving network quality and expanding network to rural areas, and these will put a lot of pressure on the profitability of the industry,” Mathews added.