Tariff war sends telecom revenue growth reeling to just 2.5 per cent

Badly bruised by the intense domestic tariff war, the telecom services industry posted a meagre growth rate of 2.5 per cent in revenues at Rs1,59,510 crore in 2009-10, compared to a robust growth rate of 20 per cent in revenues at Rs1,55,683 crore in 2008-09, according to a survey.

The survey by industry journal Voice & Data said these figures include revenue from cellular, fixed line, national long distance (STD), international long distance (ISD), broadband, VSAT, and radio trunk services.

"The intense tariff war caused the steep fall and overall slowdown in the performance in all segments, including cellular services, which over the past several years have been leading the growth in earnings for the telecom services sector," said the Voice & Data report.

Despite a near 50 per cent subscriber growth, the mobile services segment grew a meagre 3.6 per cent to Rs 96,860 crore from Rs 93,522 crore. Highly competitive pricing and introduction of 1 paisa per second calling introduced by new players forced leading players to cut rates. The study expects competition to become more intense, with 14 active mobile players trying every trick in the trade to stave off negative growth.

The Indian government has probably been overly lax in granting telecommunication licences in recent years. As a result, India has as many as six telecom operators, apart from state-owned Bharat Sanchar Nigam Ltd and Mahanagar Telephone Nigam Ltd, vying with each other for market share in many 'circles' or operational areas. This has resulted in India having the lowest mobile telephony rates in the world, but at the same time it has cut into the operators' viability.

It has also resulted in a serious shortage of radio spectrum, making it difficult for operators to offer anything better than basic voice and data services. Even the much touted auction of third generation or 3G and Wi-Fi spectrum, which netted the government an unexpected bonanza of over Rs1 lakh crore, more than three times what it expected, has given the winning bidders only 5Mhz extra leeway to launch these services, when the international norm is 10-15 Mhz.