Mobile operators' revenue dips

The per second billing introduced by telecom companies has come as a boon to millions of mobile users in the country, but it is proving to be a bane for cellular service providers as it is affecting their revenues, feel industry experts.

According to the Telecom Regulatory Authority of India (Trai) data, the number of mobile subscribers in India has risen to more than 500 million at the end of November and experts are of the opinion that though the number of mobile users has increased astronomically, the revenues are not in accordance with the number.

"We had to tie up with a Kirana shop merchant to offer a SIM card on purchase of a five kilo atta packet to achieve the target," Praveen, a salesman with a mobile company said. The cost of the SIM has come down as cheap as Rs 50 with Rs 5 talk time. Most of the users throw the SIM after they use the talk time, he said.

The financial impact of per-second tariff announced by almost all telecom operators last October is expected to have an impact in the financial performance of the companies, despite a continuous growth in the number of subscribers.

"Per-second billing is unsustainable. It affects EBIDTA (earnings before interest depreciation, taxes and ammortization) margins. We will see these tariffs for another year-and-a-half after which consolidation will set in," Aircel COO Gurdeep Singh had said in Mumbai recently.

According to Harit Shah, head of research (IT and telecom), Angel Broking, the margins of the companies will have impact as there is reduction on cost side.

"As per some reports revenues of telecom companies will be affected by 10-15 per cent due to tariff reduction. The affect will be felt in the fourth quarter," Shah said, adding the consolidation may happen after two years.

Though the companies announced the reduction of tariffs, the interconnect charges are not reduced. The companies cannot have short term goals under the present conditions, he said.

According to an industry expert the rate is 20 paisa per minute. That means the operator will have to pay 20 paisa as call termination charge to other operator if the call is cross-network.

There are about 12-13 telecom operators in India now and the rate could be sustainable only for a few operators who have the capability.

The mobile tariff war in India intensified after Tata Teleservices launched its GSM services under the brand name Tata Docomo announcing a per-second tariff followed by other major players like Airtel, Vodafone, BSNL and Reliance.