Wednesday, 7 June 2017

Indian Telecom industry is at its weakest, govt will have to step in.

Source : Business standards

The is now composed of three sets of players:
1) Established incumbents like Bharti, and Cellular which have executed well in the past and have strong brands. merger with will solve the capacity constraints of both the players

2) Weaker players like Telenor, MTS, RCOM, BSNL, and which are exiting or are consolidating for survival. Even after consolidation, the operators ability to invest will pose a challenge

3) which has defined the technological and strategic landscape.

In future, the will see slower investments and more consolidation. With so much supply in the market, revenue will grow with usage albeit with a lag. We expect 11 per cent revenue over the next 5 years but most of the growth will be back ended post consolidation. The weaker players will have to exit but their presents a structural problem for an exit. In this regard, the government might need to step in to improve the profitability to ease the exit of players and solve the structural issue. The government has many levers to improve the profitability which include reducing service tax to usage charges. All or any of these measures can improve the profitability significantly.

Finally, little help from regulator
The Indian is at a critical juncture and faster improvement in profitability will be crucial for long-term health of the sector. consolidation is critical but government interventions to improve profitability will help the sector immensely. The Indian sector has immense potential for growth but realising the potential is in the hands of government and regulator.