All telcos expect RPM to inch up marginally in 1Q as everyone is curtailing free minutes/freebies, which is pushing the implied RPM up. Going forward, we expect competitive intensity to further decline as we expect some of the smaller telcos to further reduce their footprint and close operations in a few more circles. This would likely lead to continued MOU shift in favor of larger telcos, like Bharti, Idea, etc
3G Data growing slowly and steadily – Expect continued data increase (off low base) led by improving 3G coverage and increasing smartphone penetration. However, we do not expect any Indian telcos to show a hockey stick increase given limited capex investments and only 5 MHz spectrum per operator. Based on our meetings, we believe larger telcos are seeing a temporary slowdown in addition of new subs given the court order on ICR (Inter-circle-roaming) issue not allowing them to add more subscribers.
On National Roaming TRAI’s policy of conditional free roaming (and not full free roaming) to be balanced as it achieves the government objective of allowing free national roaming and does not materially impact telco revenues. As the current tariffs for most packages in the market are largely in line with the new proposed ceilings, we do not expect most telcos to reduce tariffs to meet the new guidelines. The only exception is incoming calls during roaming, where current tariffs are around Rs 1/min (higher than proposed ceiling of Rs 0.75/min).
Spectrum Refarming – In our view, there is not much clarity on pricing of spectrum and on 900 MHz refarming/renewal, even with the decision makers like DOT / TRAI. Given that incumbent telcos have moved to the high court to challenge the government’s decision to auction the 900 MHz spectrum, we believe any clarity on this issue may take some time (until the court decision comes).