3G churn may go up as roaming is cancelled

Top three telecom companies also provide 3G services in circles where they did not acquire spectrum

The Department of Telecommunications (DoT) today asked Bharti Airtel to stop intra-circle 3G roaming. Similar orders could follow suit for Vodafone and Idea Cellular as well. And this, could trigger churn amongst subscribers who might have to give up their services.

While the top three telecom companies have bid and won spectrum in some circles, they also provide 3G services in circles where they did not acquire spectrum. No telecom operator won a pan-India 3G licence in the aggressive bidding that happened in 2010.

The government said that this not permissible over a year back, and ever since the issue has reached the telecom tribunal and orders might go up for appeal. DoT has even spoken about levying a fine of Rs 50 crore per circle.  

The subscribers of 3G service have just started to grow, and disruption in services could lead to migration to other operators. High speed 3G data services took off after all major companies cut their 3G tariffs by around 70% in May last year.

“The growth in 3G subscribers will continue to grow, but those subscribers who will require these services might port out. Overall growth will not be impact but those of companies could be,” said Daryl Phillip, senior telecom analyst at Finquest.  In the long-term however operators may have to shell out more money to acquire spectrum in circles where they do no possess 3G licences.

Even if 3G subscribers port out, analysts believe that it will have no impact neither on companies' earnings nor on their stock performance. “This issue of canceling 3G services in roaming areas have been factored in. 3G business is very small and it will have no impact on stocks,” said Sushil Sharma, senior research analyst, BRICS Securities.

Out of Bharti Airtel's 182 million subscribers, only 6.8 million of them use 3G services. Of this number, 5.2 million are active 3G data customers. Similarly, Idea Cellular too has around 2.6 million of its 114 million subscribers active on their 3G networks.

The impact of any service disruption will be limited only to those subscribers who are in roaming circles of companies. These operators would continue provide these services in circles where they possess spectrum. Bharti has 3G spectrum in 13 circles, Idea in 11 and Vodafone in nine circles.

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