Telecom industry earnings to remain under pressure for 3-4 quarters more: COAI

Telecom industry earnings to remain under pressure for 3-4 quarters more: COAI

Mobile operators’ body COAI has said that telecom companies will continue to suffer financial strain in the coming months, given the increased competition over tariffs.

Industry body COAI expects earnings of mobile operators to remain ‘depressed’ for another 3-4 quarters, hurt by the sheer intensity of competition in the telecom market. Major operators are slated to announce their January-March quarter results in the coming weeks, in a market defined by cut-throat competition and falling tariffs that benefit consumers but erode telcos’ profitability.

A recent report by the Telecom Regulatory Authority of India (TRAI) has noted that the gross revenue of telecom services providers fell 8.1 per cent while the licence fee collected by the government dropped by 16 per cent year-on-year in the quarter ended December 31, 2017. The adjusted gross revenue (AGR) earned by companies from sale of telecom services declined by 16.05 per cent to Rs 38,536 crore in the said quarter on year-on-year basis, reveals TRAI’s quarterly performance indicator report.

Cellular Operators’ Association of India (COAI) Director-General Rajan Mathews sees no let up in pressure in coming months. “The intensity of competition will ensure that earnings will be depressed for 3-4 quarters. This is something that is going to be the new normal and I don’t see how it will materially change,” Mathews told PTI. Mathews said that the players are facing two types of challenges – difficulty in raising prices after offering large discounts and increased commoditisation of various services.

“So, we have to look for augmented revenue streams and we are hoping that the operators will be rational enough not to commoditise the new opportunities coming through like Internet of Things (IoT), 5G etc,” he said. In a recent earnings preview for the sector, Kotak estimated that Jio’s aggressive pricing moves in January, combined with the impact of international termination rate cut and continued pressure on average revenue per user are likely to result in “another quarter of sharp sequential revenue decline for the incumbents”. It has also cautioned that Bharti Airtel may see net loss, its first in many years.