Regulations
Call drop penalty norms fraught with glitches: Analysts

A subscriber could get a maximum of Rs.90 per month. But based on average revenues per subscriber, which is Rs.180-Rs.200 for Idea and Bharti, it can prove quite a knock

 

The Indian telecom watchdog's decision to penalise mobile phone service providers for call drops is fraught with glitches as it ignores issues like technical hurdles in assigning reasons, poor spectrum policy and obstacles in roll-out of towers, analysts maintain.
 
On the face of it, Rs.1 penalty per call drop, limited to a cap of three such occurences per day, may not appear steep. A subscriber could get a maximum of Rs.90 per month. But based on average revenues per subscriber, which is Rs.180-Rs.200 for Idea and Bharti, it can prove quite a knock.
 
"There are also likely to be technical hurdles in implementation. Based on our discussions with telcos, it isn’t easy to determine the cause of call drops," said a Nomura report, adding this can be due to limitations in both the originating network and terminating network.
 
Actions like removing phone batteries or stepping into low coverage areas can also be the causes.
 
"Anyone designing telecom networks will know that ensuring nil call drops is near impossible for commercial operators. There are several external factors beyond the operators' control that could influence call drops," said Credit Suisse, while also pointing out some technical glitches.
 
"The new rules mandate that only originating network is to compensate the originating subscriber. It is not clear how the situation is handled if the call drop occurs due to a problem with the terminating network," it said.
 
A Morgan Stanley report questioned how this can be executed. "The unanswered question is how will the regulator practically implement testing methodology for call drop, as it could imply as much as 50 percent of average revenue per user is at risk for the most unreliable network operators."
 
Speaking about the existing norms, Deutsche Bank Market Research said mobile companies currently need to achieve less than 2 percent call drops and that tests by the regulators own reports show that companies are adhering to this across most of their operating markets.
 
"Hence we are perplexed by the move for penalty on a per-call basis. The regulation is likely to introduce another layer of complexity to the operators’ billing systems. Besides the regulator has not specified any mechanism to audit the claims which are bound to arise in future."
 
In its report, the regulator said it had examined the representations of telecom operators, who maintained that some issues beyond their control, like poor spectrum allocation and difficulties in setting up towers, were also contributing to call drops.
 
But the watchdog said it was for this reason that the the compensatory mechanism has been kept simple, so that the consumers can understand the same easily, and the operators are able to implement it as well. The new norms take effect from January next year.
 
"Our analysis suggests that potential penalties may have an adverse impact on Bharti’s revenues by 4percent and earnings before interest, taxes , depreciation and amortisation by 7 percent. Telcos have the option to challenge new regulations in court," said HSBC Global Research.
 
Adding to it, Deutsche Bank report said: "The regulation is likely to introduce another layer of complexity to the operators’ billing systems. Besides the tekecom regulator has not specified any mechanism to audit the claims which are bound to arise in future."
 
Some analysts felt, this could also impact on the 4G players.
 
"Though coverage issues for 4G entrants don’t get resolved till the time they have access to 850 spectrum band, new regulations on call drops may help 4G players in the launch phase by managing subscriber expectations relatively better," said HSBC Global Research.
 
"Furthermore, capex (capital expenditure) for competition goes up and puts them in a situation to focus more on voice, at a time when data is the growing category," it said adding the regulations may also delay the plans of incumbent telcos to re-farm 900 MHz spectrum band for data.
 
But the representative body, Cellular Operators Association of India (COAI) has not lost hope.
 
"Our first preference is to engage in a dialogue with the regulator to get clarifications over call drop norms, keeping in mind there is time till December 31. But if no proper resolution comes out of the dialogue, we will have to seek legal help to protect our interests."
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
 
 

User

Kerala's plantation sector headed for turmoil

BK Ajith, secretary of the Association of Planters Kerala (APK) - an umbrella organization of planters of tea, rubber, cardamom and coffee - said the plantation sector can go haywire in two months

 

Mounting costs of producing tea, rubber, cardamom and coffee and the low prices the yield fetches is severely affecting the plantation sector in Kerala, an official of the planters' organisation said on Wednesday.
 
B.K. Ajith, secretary of the Association of Planters Kerala (APK) - an umbrella organization of planters of tea, rubber, cardamom and coffee - said the plantation sector can go haywire in two months.
 
The group represents about 60 percent of the organised plantation sector in the state.
 
Kerala today accounts for 82 percent of the country's rubber production, 71 percent of cardamom, six percent of the tea and 21 percent of the coffee.
 
The daily wages of more than three lakh plantation workers, who ended their three week-long strike early this month, were increased recently.
 
But Ajith hinted at other factors which lead to an increase in the production costs.
 
The production costs of cardamom stands at Rs.700 a kg, while the market price of a kilogram of cardamom is Rs.620, he said.
 
"Coffee planters in Kerala are going to be seriously affected as production in Brazil has reached much higher levels. There has been a currency devaluation as well. Thus, all cash crops in Kerala will be seriously affected," added Ajith.
 
APK officials are also peeved that their long standing demands for reducing the plantation, agricultural and land taxes have fallen on deaf ears.
 
While Tamil Nadu levies no taxes in the plantation sector, Kerala charges Rs.700 a hectare as plantation tax. The agriculture income tax is 50 percent of the profits, while in other states it is 28 percent. The land tax here is Rs.500 a hectare, Ajith complained.
 
Similarly, the electricity tariff was increased for the plantation sector last year, he said.
 
"If something drastic does not happen, things will come to a halt very soon," said Ajith.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
 

User

COMMENTS

sundararaman gopalakrishnan

2 years ago

What could be one of the leading states in India,Kerala is one of the least industrialised( has become a state where industrialists are afraid to invest money due to well known labor problems.)



Meenal Mamdani

2 years ago

Kerala has always been unfriendly to business. That is the reason why despite very high literacy and education levels, Keralites migrate to other parts of India or go abroad for jobs.
Plantation workers should not be squeezed to enhance profits.
As the article correctly points out, there are other areas which put a heavy load on production costs.
Instead of focusing on trivialities like liquor ban, the politicians should concentrate on making Kerala attractive for business.

Foreign mutual funds exit: Now Goldman Sachs & Nomura to quit India

Goldman Sachs has sold its mutual fund business to Reliance Capital. Nomura too, is said to exit its joint venture with LIC. Foreign players are again calling it quits

 

Reliance Capital Asset Management (RCAM) will take over Goldman Sachs' mutual fund business in India for Rs243 crore. RCAM will acquire all 12 mutual fund schemes of Goldman Sachs Asset Management India. Goldman Sachs, which does not have a strong retail focus, had surprisingly decided to enter the Indian mutual fund industry in 2011, by acquiring Benchmark Mutual Fund for Rs120 crore. The fund has a total asset under management (AUM) of Rs7,132 crore. Frustrated by poor market prospects after 2009, a number of global players like Fidelity, Daiwa, Morgan Stanley, ING, PineBridge and Deutsche have already exited the Indian mutual fund business over the past few years. According to newspaper reports, Nomura too plans to sell its 35% stake in LIC Nomura Mutual Fund. Nomura had entered India just four years ago.
 
In 2012, Fidelity’s business was taken over by L&T Finance, while last year Morgan Stanley was bought by HDFC Mutual Fund. Other smaller foreign players too, called it quits in the recent past, finding it increasingly difficult to stay afloat in the highly concentrated Indian mutual fund industry. While there are more than 40 fund houses in the country with total AUM of over Rs13 lakh crore, the bulk of the assets are skewed towards the big players. Naturally, the profits too are skewed towards the top AMCs. The large asset management companies making super profits and the smaller players struggle to survive. There were 21 mutual funds which made a profit totalling about Rs1,500 crore, while 20 mutual funds made a total loss of about Rs300 crore. The top seven fund houses reported a double-digit growth.
 
 
 
The top three fund houses account for 42% of the total equity AUM of the 40 mutual fund houses. The top 10 fund houses account for nearly 83% of the total assets. The top 10 fund houses have equity assets of over Rs10,000 crore. In comparison, Goldman Sachs has an equity AUM of just Rs107 crore.
 
This continuous string of exits reflects that sorry state of India’s mutual fund industry. Over the past year the Securities and Exchange Board of India (SEBI) came out with a slew of reforms in order to drive more retail participation. However, only the large fund houses seemed to have benefited.
 
While mutual fund inflows over the past year may have increased only the big players with a strong distributorship seemed to have gained the maximum inflows. The top fund houses have the strong distribution network of large banks or financial institutions, giving them reach and are able to drive more inflows. 
 
The data clearly shows that that for banks, a high concentration of in-house mutual fund sales is to their asset management companies (AMCs). Based on the distributor commissions of FY2014-15, more than 1/3rd of the commission pay-outs to banks are sourced from its in-house AMC. HDFC MF and ICICI MF, contributed to 35% and 68% of their bank’s mutual fund commissions. HDFC Bank and Axis Bank drew the highest MF commissions. Canara Bank, State Bank of India and Union Bank of India earn over 90% of their commissions from their in-house AMCs.
 
Large fund houses could afford to pay high upfront commissions and advance trail commissions to distributors. It is only now that commissions caps have been put in place. As the large fund houses grow bigger and bigger, we may see many more exits in the future.
 

User

COMMENTS

Suketu Shah

2 years ago

Mutual funds is turning out to be a real big joke in India.Hardly 5% or less bt the sensex.Its to keep the agents and intermediaries employed more than anything and under the guise of "self-certified expert fund managers" ,fool the end customer and ensure he cant quite for long.

Mahesh S Bhatt

2 years ago

Cannot Understand whether Anil Amabani is better manipulator or Goldman Sach's.

Here it appears its match fixing Global level??

Sucheta some backend Ambani/Goldman debt/loan adjustments details??Dig Dig more.

Stanford's MBA Rajat Gupta is enjoying USA taxpayers $ paid free breakfasts/lunch dinners after being crucified for $21trillion USA meltdown with our Srilankan friend Ratnaraman.

They are symbolic Financial Social US Justice Departments scalps for Wall Street Wolves.

Well Big 5 got support from Government & got absolved.

Mahesh Bhatt

Jayant

2 years ago

It will not be long before even Indian AMC's shut shop if the ridiculous plans of AMFI & SEBI are implemented. Eating into revenues of IFA's & illegally collecting service tax are just few of the thoughtless ideas. The latest now being "selling" funds through e-commerce sites. Stop upfront and now even trail commission, why should anyone bother advising investments in Mutual Funds. Guess pockets of SEBI officials have been filled by e-commerce sites, so the rest does not matter.

Sanjeev Binaykia

2 years ago

I agree with Meenal above. The total AUM is 13 lakh crore, not 133 lakh crore as reported above (see http://www.moneycontrol.com/mutual-funds....

The top 5 funds have about 3 lakh crore, about 25% of the AUM. This seems to be healthy enough in terms of competition, it is certainly not an oligopoly.

When then should we worry about companies entering and exiting the business. In fact this is a sign of a healthy industry where companies can make business decisions to enter and exit quickly.

As for foreign vs local, Franklin Templeton is doing well as one of the top 6. If other foreign companies find the Indian market too competitive or difficult for them, why should it be a problem? Customers are getting the benefits of a competitive marketplace.

This article seems just so meaningless.

SuchindranathAiyerS

2 years ago

With "retrospective" Pranab lolling in the Rashtra Potty Bhavan, and India's totalitarian, "Animal Farm" Constitution fully exposed, with every ugly, grotesque iniquitous law ever passed still in the statute books, you really cannot keep pretending that India is not the last surviving Soviet Franchise in the World.

Meenal Mamdani

2 years ago

Can someone please explain to me why India should be concerned that foreign companies are not operating mutual funds in India?

We are listening!

Solve the equation and enter in the Captcha field.
  Loading...
Close

To continue


Please
Sign Up or Sign In
with

Email
Close

To continue


Please
Sign Up or Sign In
with

Email

BUY NOW

The Scam
24 Year Of The Scam: The Perennial Bestseller, reads like a Thriller!
Moneylife Magazine
Fiercely independent and pro-consumer information on personal finance
Stockletters in 3 Flavours
Outstanding research that beats mutual funds year after year
MAS: Complete Online Financial Advisory
(Includes Moneylife Magazine and Lion Stockletter)