Telecommunications growth inevitable despite being trampled by Indian Regulatory issues

Sept. 5, 2012 - PRLog -- In February 2012, Honorable Supreme Court of India cancelled 122 telecom licenses involving 11 companies owing to their alleged involvement in 2G spectrum allocation scam. In view of guidance from the Supreme Court, the Government will hold auction for the 2G spectrum by the end of year 2012. Despite of the adverse regulatory environment, the sector witnessed a 12% y/y growth in gross revenues.

The number of wireless subscribers grew by 13.3% y/y to 919 million in FY12 strengthening India’s position as the second largest telecom market in the world. The mobile cellular penetration rate of the country reached 76% at the end of FY12. The market was highly tilted in favor of pre-paid subscriptions which accounted for more than 95% of the total cellular subscriptions in the country. Wireline segment continued its decline in FY12 as well with total subscriber base shrinking by 7.7%. Internet and broadband segment showed positive signs recording y/y growth of more than 16% each. In the fiscal year 2012, Bharti Airtel led the telecommunication industry by recording total revenue of INR 715 billion. However it recorded a net profit decline of 41% owing to increased interest expenses. Idea Cellular Ltd recorded total revenue of INR 197 billion. Its net profit for the year stood at INR 6 billion. Reliance Communications had a tough year in terms of financial performance. It registered a revenue decline of 12% and a net profit decline of 31%. Its net debt to EBIDTA ratio soared to 5.52 by the end of fiscal year which was very high considering the industry standards.

The outlook for Indian telecommunication is positive as far as rural wireless, internet and broadband segment is concerned. The low penetration rates existing in these segments will enable high growth rates both in subscriber additions and revenue in next few years.

Key Findings
•In the  first three months of calendar year 2012, mobile wireless subscriber base grew by 2.8% q/q to reach 919.2 million. Urban wireless subscriber base grew by 1.1% while rural subscriber base grew by 4.6% during the same period.
•In the first three months of calendar year 2012, wireline subscriber base shrank 4.6% q/q to reach 31.17 million. Urban wireline subscriber base contracted by 1.8% while rural subscriber base contracted by 3.3% during the same period.
•The broadband subscriber base grew by 3.4% q/q in the first quarter of the calendar year  2012, while total internet subscription grew by 2.1% in the same period.

The gross revenues earned by the telecom sector declined by 0.4% q/q in first quarter of the calendar year 2012 (ending March 2012) to INR 492 billion against INR 494 billion earned in quarter ending December 2011. However, on a y/y basis, the gross revenues grew by 8.1% against the March 2011 figure.