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Challenging Year Ahead For Telcos

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Courtesy ET

MUMBAI: Year 2009 may ring in cheaper call rates for telecom subscribers, alright, but established telecom operators are bracing for a tough

year when their margins will be under pressure.

On Tuesday, while announcing Reliance Communications’ pan-India GSM-based mobile phonegrey_loader.gif service rollout in Mumbai, company chairman Anil Ambani summed up the general mood when he said, “We expect competitive landscape to be more intense in this space in 2009. We are launching GSM and other new operators are also coming in. Margins will be under tremendous pressure going forward.”

According to industry analysts, increased capex on account of 3G service rollout, increased competition in the shape of new entrants and a slowdown in subscriber additions will together push down telcos’ margins by up to 4% this year. Currently, operating margins of telcos range between 33% and 41%. There has already been some decline in this in the past two quarters.

They point out that all-India 3G spectrum and subsequent rollout of services would require an investment of more than $1 billion. But 3G services are expected to increase the overall revenues of players like Bharti Airtel and Reliance Communications by just around 2%. Their operating profit will be under stress since the numbers for depreciation and amortisation will be higher, analysts said.

Also, growth in new subscribers is expected to slow this year. “Absolute subscriber addition will be flat going forward,” said Harit Shah, analyst (telecom & IT), Angel Broking. That trend is expected to continue in 2009. While the number of new subscribers will become stagnant, the number of players wooing them will increase with new entrants like Unitech and Swan set to launch services in 2009.

How the industry contends with all these issues will be interesting to watch

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Yes my dear friends, 2009 could be a very Challenging Year for all Telcos. As 3G is going to be launched and after that MNP (Mobile Number Portability) is also expected.

Many New Operators will also get licenses. So, this year will really be tough for all Telcos due to Competition also.

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