S Tel to be present in 6 telecom circles by 2010

S Tel, the latest entrant in the Indian cellular market, aims to be present in six telecom circles of the country by the end of 2010.

S Tel, a 51:49 joint venture between the $3 billion Chennai-based Siva Group and Bahrain Telecom has already rolled out its GSM services in the Himachal Pradesh and Orissa circles.

S Tel aims to be present in four other category-C telecom circles of the country- Jammu & Kashmir, Assam, North-East as well as Bihar and Jharkhand (taken to be a single circle) by the end of 2010, P Swaminathan, director, S Tel told Business Standard.

Among the four new circles, S Tel aims to extend its mobile services in the Bihar and Jharkhand circle within 10-15 days and to Assam and North-east circles by the first quarter of 2010-11. In Jammu & Kashmir, we have got the spectrum in only two districts and we are aiming to be present in that state by the end of 2010, said Swaminathan.

The company has applied for licenses in the remaining 16 circles but the matter is sub judice, he added.

S Tel islooking at a subscriber base of 21 million across India by 2015 and aims to be among the top five mobile services providers in the country in the next 3-4 years. “S Tel looks to garner 21 million customers throughout the country by 2015. In the next 3-4 years, there will be only eight cellular operators in the country and we will be among the top five operators”, Swaminathan stated. The company has earmarked an investment of Rs 2100 crore on its operations in the six telecom circles.

Of the total investment of Rs 2100 crore, Rs 1250 crore is the equity component with the remaining Rs 950 crore being debt financed by a consortium of bankers led by IDBI Bank. S Tel has so far invested Rs 450 crore on its mobile services operations in the country and we are the only operator to have achieved 100 per cent financial closure, he claimed.

Asked if the crowded telecom sector in India is headed for consolidation, Swaminathan said, “It is not the smaller players but the frivolous mobile services providers who will be taken over by the larger players. The so-called consolidation is actually an escape route for the non-serious operators.”

He admitted that the price war in the mobile operations triggered by the per second billing plan has confused the customers.

Though S Tel has joined the bandwagon by introducing the pay per second plan, we have tried to get a clear understanding on the needs of the customers, Swaminathan said.

He further said the mobile tariff in India, which is presently the lowest in the world, has made the sector fiercely competitive and has put pressure on the margins of the operators who have to wait longer for achieving break even levels. S Tel expects to achieve the break even level in terms of EBITDA (earnings before interest, taxes, depreciation and amortization) margins by 2013 and hope to repay all our debt by 2018, he said.

He pointed out that the Average Revenue Per User (ARPU) of the mobile operators which is in the range of Rs 150-160 and is expected to grow only after two years. The mobile tariff in India has already bottomed out and the cellular operators have to look for alternative business models to keep themselves profitable, said Swaminathan.

Apart from sharing passive infrastructure, the mobile players need to come out with technological innovations and they also need to be helped by regulatory interventions, he added.