Telcos to be under pressure in coming quarters: Analysts

Finances of leading telecom operators will continue to be under pressure in the coming quarters mainly due to tariff wars and huge outgo for buying 3G and broadband spectrum, say analysts.

Continuing tariff war and additional debt burden on account of spectrum for the third generation and broadband wireless access services have hurt the profitability of the telecom companies, analysts pointed out and said that downturn will continue in the next few quarters also.

"The first quarter results of the telecom companies was hit by the 3G spectrum cost realisation and stiff pricing competition among them and this is to continue for the next few quarters as the launch of mobile number portability (MNP) services will exaggerate the already tight market," CNI Research CMD Kishore P Ostwal added.

Most of the telecom majors, including country's largest private sector telecom operator Bharti Airtel and Anil Ambani led Reliance Communications (RCom), have posted poor first quarter numbers.

Bharti Airtel reported a decline of 32 per cent in net profit at Rs 1,682 crore for the first quarter this fiscal, hit by foreign exchange losses and cut-throat competition in the domestic market.

RCom, the country's second largest private telecom operator, also reported a sharp 84.67 per cent dip in net profit to Rs 250.89 crore in the first quarter.

RCom won 3G spectrum in 13 circles and it had paid Rs 8,585.04 crore towards spectrum fees to the Department of Telecommunications.

The steep decline was mainly on account of high foreign exchange provisioning.

State-run Mahanagar Telephone Nigam Ltd (MTNL) posted a loss of Rs 451 crore for the quarter ended June 30, 2010, weighed down by the outgo for 3G spectrum fee.
    
The loss is due to increased staff cost, provision for retirement benefits and payment of spectrum on amortisation of one time charges of 3G and BWA spectrum to the extent of Rs 157.6 crore during the quarter, the company had said while announcing the Q1 results.
    
Idea Cellular too had paid Rs 5,768.59 crore for the recently concluded auction for 3G spectrum, the company had successfully bid for 11 service areas.
    
The Government had mopped up a total revenue of over 1 lakh crore from both 3G and BWA auction.