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| New entrants no sweat for existing telecom players |
| Rajesh Kurup / Mumbai Sep 07, 2009, 01:54 IST |
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The price war unleashed by new telecom players may have created some noise in an already-crowded market, but existing service providers are not losing much sleep.
Analysts said pricing gimmicks may help in the short-term, but the far bigger concerns are in terms of infrastructure and funding. “New entrants are likely to be a threat to each other than to incumbents,” they said.
Predictably, the incumbents agree. Reliance Communications (RCom) President-Wireless, S P Shukla, said existing players had the crucial time-advantage, as new entrants would take time to build a quality network and infrastructure.
Importantly, the new entrants would have to operate on the less-efficient 1,800 MHz spectrum, compared with 900 MHz used by existing players. This would hamper their efforts to provide quality services, while existing players were already providing 2.5 G services using 900 MHz spectrum, Shukla added.
Bharti Airtel, RCom, Vodafone-Essar and state-owned BSNL and MTNL are the existing players. As many as six new licencees, including Unitech Wireless, Shyam Sistema, Loop Telecom, Etisalat DB Telecom India and S-Tel are planning to launch services. Aircel, which started operations in 1999, is also considered a new player, as it had got additional licences.
CDMA majors like Tata Teleservices Ltd (under the Tata DoCoMo brand) and RCom have rolled out GSM services and existing players like Idea Cellular are expanding operations.
“While competition for the new operators is tough, it will not affect existing players, as consumers always move towards a multi-device lifestyle, and the appetite for content and communication is growing. And existing service providers were well placed to provide this,” said Media Tek India Technology’s director, business development, Arun Gupta.
Existing telecom service providers are continuously going up the growth curve by providing dedicated services, Gupta added. Media Tek is a Taiwanese semi-conductor company for wireless communications.
According to HSBC Global Research, the issue with 1,800 MHz spectrum is that it requires at least 1.5-2 times the number of towers to cover the same area that can be covered with 900 MHz spectrum and operators with lower frequency (900 MHz) enjoy about 20 per cent higher Ebitda (earnings before interest, taxes, depreciation and amortisation).
“We think while newcomers are perhaps not a serious threat to the incumbents, they pose a threat to each other, especially as new entrants initially target subscribers looking for the best deal,” it added.
Etisalat DB, according to HSBC Global, has a strong balance sheet, but the delay in launching services has taken the “pressure off incumbents”. Etisalat will need 60,000 towers for “adequate” pan-Indian coverage, against 13,500 now. The company plans to increase it to 38,000 by the end of the year.
For Shyam Sistema, offering CDMA in a GSM-dominated market is a “distinct disadvantage”, as CDMA players have moved to GSM and a large part of subscriber additions are coming in from GSM services.
The concern for both RCom and Tata DoCoMo is that the companies are using CDMA towers for GSM services. Though this may save on capital expenditure, quality is likely to suffer. Unitech will find it tough to expand its services “quickly enough to attract the required subscriber base”, while Etisalat DB will have to attract a lot of high-end subscribers from rivals to gain traction.
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