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Impact of Rate War On Indian Telecom Industry

The document summarizes the impact of a rate war occurring in the Indian telecom industry. Major telecom players have engaged in predatory pricing, intensifying worries over the adverse effects on company revenues and profits. Analysts expect telecom shares to remain under pressure for several quarters as hypercompetition stagnates industry revenue growth. The rate war has led telecom stocks to fall sharply and is expected to further erode company revenues by up to 15%. Industry executives believe the rate war will last until operators differentiate their services beyond just pricing.

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Utkarsh Sethi
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78 views

Impact of Rate War On Indian Telecom Industry

The document summarizes the impact of a rate war occurring in the Indian telecom industry. Major telecom players have engaged in predatory pricing, intensifying worries over the adverse effects on company revenues and profits. Analysts expect telecom shares to remain under pressure for several quarters as hypercompetition stagnates industry revenue growth. The rate war has led telecom stocks to fall sharply and is expected to further erode company revenues by up to 15%. Industry executives believe the rate war will last until operators differentiate their services beyond just pricing.

Uploaded by

Utkarsh Sethi
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPT, PDF, TXT or read online on Scribd
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IMPACT OF RATE WAR

ON INDIAN TELECOM
INDUSTRY

Submitted By :-
Utkarsh Sethi
Neeru Rawat
Tariff’s Unleashed
• Predatory pricing unleashed by a few
wireless players heightened worries over the
adverse fallout on the companies'
bottomlines.

• According to analysists :
– Telecom shares will be under pressure for a few
quarters.
– This is what you call hyper-competition.
– This could stagnate industry revenue growth for
the next 12 months.
– This will replace all existing schemes.
Telecom stocks tank on price war
woes
• Price war is only likely to
intensify with a number of new
players waiting in the wings.

• Telecom shares fall on tariff war.

• Likely to remain under pressure


for quite some time.

• The move could see erode


revenues of telecom companies
by up to 15 per cent.

• All join the tariff war.


Share Price Falling
• Trai Chairman JS Sarma Share price
said that it might ask all on BSE in
operators to consider the Telecom Rs
per-second pulse a
mandatory option along 5-Oct 6-Oct %chg
with their other rate plans.
Reliance Comm 300.20 268.25 -10.64

• Comments from TRAI chief


on 'per-second-billing' Bharti Airtel 400.30 359.40 -10.22
added fuel to the fire.
Idea Cellular 70.59 64.75 -8.27

• As a result share price of MTNL 87.35 82.90 -5.09


six telecom companies slid
TTML 33.70 32.45 -3.71
3-10 percent.
Expectations
• Tariff war seems to have
forced other players to match
or even better the offerings
announced by them.

• New entrants are expected to


launch wireless services with
competitive pricing.

• Expected to cut profitability.

• 13 percent fall in telecoms'


2010/11 earnings.

• This will bring down revenues


and future profit margins.
Per Second Billing
• Tata DOCOMO was first to announce the per
second billing, but all others are following suit
quickly.
– Vodafone Essar in Madxhya Pradesh circle.
– Sistema Shyam Teleservices in  Delhi.
– Aircel Cellular in five circles (Orissa, Bihar, West Bengal,
Kolkata and Kerala)
– IDEA Cellular in Bihar and Jharkhand.

• New players have nothing but tariff to offer.

• These tariff interventions will get traffic from


customers but not revenue.
Till when is this tariff war going to
last?
• According to Mr. Sanjeev Aga, Chairman & CEO – IDEA
– The price bottom keeps changing. But, it is not going to
last for long. The prices have to stabilize soon or else it
may spell doom to Indian Telecom Industry.

• “My view is the prices are at rock bottom. Is there a


further cushion available for it to go down? Very little” -
Sunil Mittal.

• “Until a particular operator comes up with differentiated


service offerings or customer service, price wars will
continue.”
THANK YOU

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