Listen to music

Thursday, November 12, 2009

{M:H:O} The `Per Second Billing` impact on Indian telecom industry.



 
 
 
The `Per Second Billing` impact on Indian telecom industry


 

 
 

Market is flooded with `Per Second Billing` offering from almost all telecos these days. The scheme has become so popular among the new and existing subscribers due to attractive price of 1 paisa per second. Thanks to Tata Docomo, a brainchild of Tata Tele Services, which was the first to come out with Per Second Billing scheme.

Tata Docomo has not only successfully managed to grab a bigger share in new subscribers addition but has also beaten biggies like Bharti Airtel and Reliance Communications who have been forced to follow the same route to maintain their market positions.

With this increase in competition, the dynamics of telecom industry, which was earlier controlled by top few companies, is now changing thus leading to price war among players. The competition is good from subscribers' point of view. But is telecom industry ready for this changing environment that has left the stocks to have blood bath on D-Street?

 

 

 

 

 

 

 

 

 

The game ploy:

The industry has high fixed cost and thrives on volume growth for operating efficiency to improve. The only way a new operator can differentiate himself is on price. From a new operator's perspective, the network has been put in place and it is going underutilized. Therefore the chase for volumes is important.

The result:

The result is already visible. Bharti Airtel which all the while led in the subscriber additions space slipped down to No 2 position having 16.78% of the new subscribers added, according to the September 2009 figures released by Telecom Regulatory Authority of India (TRAI).

The place has been taken over by Tata which mopped up more than quarter (26.74%) of all the wireless subscribers that were added in September 2009.  The third and the fourth position was taken over by Reliance (13.38%) and Vodafone (13.16%) respectively. 


 

 

 

 

 

 

 

 

 

 

 

 

This is just the beginning:


Analysts feel that the era of high margins are over and the price game is more likely going to impact the profit margins of the company.

``We believe that this is not last of the price wars for the sector. The commoditization process is expected to intensify further, `` notes brokerage house Bonanza Portfolio.

``The endgame would be operators with stronger balance sheet strengths will gobble up the smaller players. Players with strong balance sheets and good corporate governance would emerge stronger post the shakeout, `` notes brokerage house KC Securities. Expect the fight for traffic market share to continue over the coming months, it cautions.

What to do with telecom stocks?

Analysts with whom we spoke with have overall imposed the `AVOID` tag on the telecom stocks and suggested a wait and watch move before exploring the sector.  

Recent trend also showed that mutual funds are reducing their exposure to telecom sector. India`s top mutual fund Reliance Mutual Fund has exited Reliance communications by selling 2.70 million shares and Bharti Airtel by selling 0.60 million shares during October 2009.

``Coupled with lower profits the prices of stocks are headed south in near foreseeable future, `` notes Bonanza additionally recommending investors to wait and watch on the sector before taking exposure to it.

``The stocks might go through a long period of consolidation and wait for the dust to settle before they start moving again. The sector is, hence, best avoided at this point of time, `` notes KC Securities.

Alex Mathews Head, Research Centre – Geojit BNP Paribas Financial Services who concurs with `AVOID` tag feels that the margin contraction is expected broadly in the wireless sector.

 
 
 
 
 
 


--
regards
ravikiran kr.


__._,_.___


Visit Our WebSite : www.MumbaiHangout.Org

             Forum : www.MumbaiHangout.net

Our Friends Network: http://social.mumbaihangout.org/home.php

------------------
DISCLAIMER :
------------------


This message serves informational purposes only and should not be viewed as an irrevocable indenture between anyone. If you have erroneously received this message, please delete it immediately and notify the sender at MumbaiHangOut-Owner@yahoogroups.com. The recipient acknowledges that any views expressed in this message are those of the Individual sender and no binding nature of the message shall be implied or assumed unless the sender does so expressly with due authority of The M.H.O. Group. M.H.O. reserves the right to repeal, change, amend, modify, add, or withdraw the contents herein without notice or obligation.
---------------------------------------------------
Note:- MHO is Not Responsible For Any Claims.
---------------------------------------------------




Your email settings: Individual Email|Traditional
Change settings via the Web (Yahoo! ID required)
Change settings via email: Switch delivery to Daily Digest | Switch to Fully Featured
Visit Your Group | Yahoo! Groups Terms of Use | Unsubscribe

__,_._,___

No comments: