Tariff war to hit telecom sector profitability: Fitch
07 Oct 2009
New Delhi: Fitch expects the recent tariff war by new telecom entrants in India and the likely retaliation by incumbent operators, to have a significant impact on industry revenues and profitability.
The reduced tariffs will lower the average revenue per user (ARPUs) and operating margins for all telecom services providers, it said in a ew report, Indian Telecom Industry - Stable Outlook with declining margins.
Earlier in August, Fitch had warned that EBITDA margins of existing operators would fall on lower ARPUs in the near term.
"The exaggerated tariff reduction and competitive intensity will likely reduce ARPUs by 10 per cent-15 per cent, which is lower than expected." it said.
The Indian telecom industry is witnessing price wars with the entry of the new telecom operators, which were allotted universal access service licenses (UASLs) in February 2008 by the department of telecommunication (DOT).
The new GSM entrants - Aircel, Sistema Shyam Teleservices Ltd and Tata Docomo - have launched aggressive tariff plans in an effort to garner subscriber market share.
These new entrants have launched per second billing, either selectively or throughout their networks, while for its CDMA services Tata has launched tariffs on a per call basis, irrespective of duration at Re1 and Rs3 per call on local and STD, respectively
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