<p>The 2G scam drama unfolds with an ever increasing list of villains and victims. The advertising and allied fraternity could be the latest to join the second list. Wondering how? Here’s your explanation: After the Supreme Court directive issued in February on cancellation of 122 2G licenses, it is possible that several players may decide to shut shop permanently. In the face of such an eventuality, accompanied by the existing players being forced to buy spectrum afresh, there could be a fall in the advertising spends from the telecom industry and resultant revenues for allied industries. A cause of concern, considering that telecom is a top 10 category in terms of its contribution to advertising volume on television. The category contributed around 4 per cent in 2011 to the overall volumes as per the KPMG-FICCI Indian Media and Entertainment report released earlier this year. (Total spend in 2011 across media: Rs 300 billion.)
As per industry estimates in monetary terms, the category spends approximately Rs 2,000 crore annually across media like television, print and out-of-home (OOH). And post the cancellation of the licenses, the fall in spends could be to the tune of Rs 400 crore.
“There are two parts to this. On the one hand, you have players whose very existence has come into question post the cancellation of licenses and may exit entirely. On the other are players who’ve seen just a few licenses cancelled and may be able to make good losses if any through their other circles,” says Ashish Bhasin, chairman (India) and CEO (South East Asia), Aegis Media. This would mean that a complete loss of advertising revenue on account of a few players and a partial on the others.
The bulk of the losses is likely to be borne by the OOH space. “The overall advertising strategy, especially with regard to television of nationalised players who continue to be present nationally (even post the 2G license cancellation) may not be impacted majorly. They may however cut down on OOH, which is a more localised medium for advertising,” adds Bhasin.
The fall in OOH spends has however been an ongoing phenomenon as per Arminio Ribeiro, CEO, Madison (Outdoor businesses). He says, “Telecom has over the past three years gone from its position as the second highest spender in outdoor to sixth last year. Emerging categories like retail and real estate have overtaken the category.”
Ribeiro also concedes that spends on outdoor are expected to stagnate at current levels. “While companies aren’t cutting budgets yet, we anticipate them to stay cautious through at least the first half of this fiscal year. By August or so, one may get a clearer picture of their stand,” he says.
Industry players say that the “big daddies” of telecom — Bharti Airtel, Vodafone, Idea — continue to spend and invest in major television campaigns. And are also quick to add that the players who’ve been impacted the most like Loop Telecom, Siestema Shyam and DB Etisalat haven’t invested substantially in media campaigns yet for it to be considered a “loss”.
As for the existing players, there hasn’t been any major slowdown in advertising spends. But, as one marketing head of a telecom major points out, “In the circles where licenses have been cancelled, there has been a natural drop in competitive intensity. The slowdown worries may become far more pertinent, if existing players in these circles decide to cut their spends, thinking that their users for want of options will continue to stay with them.”