Competition taking its toll—Bharti Airtel slashes prepaid tariffs
 
Bharti Airtel Ltd, India's largest telecom operator, has announced a new tariff plan, Advantage Airtel, to its prepaid subscribers that offers local and national long distance calls at 50 paise per minute. However, there is a catch; you will have to pay an additional Rs50 per month to avail these rates.
 
Time and again all mobile services providers come out with various tariff plans, the latest from Airtel has its own reasons. "The surge in Tata Teleservices Ltd's (TTSL) August net-adds, clearly suggested that incumbents were losing traffic and minutes of use, with rapid proliferation of multiple SIM ownership. Post the latest cut, Bharti’s tariffs compare well with TTSL's ‘normalised’ GSM tariffs, though still higher than the ‘promotional’ or limited period, rates offered by TTSL," said Anand Rathi Financial Services Ltd, in a report.
 
During August, TTSL added 3.4 million subscribers while the same for Airtel was 2.8 million. Idea Cellular added 1.5 million new subscribers, while ADA group company, Reliance Communications Ltd (RCom) could garner only 1.7 million subscribers, in both GSM and CDMA segments.
 
TTSL had showed a healthy growth in new additions in July as well with 2.2 million new subscribers. “While TTSL has shown a growth of 50% or more in new subscriber additions in July and August 2009, other telecom operators have shown flat or negative growth in new additions in the same period,” TTSL said in a release.
 
The wireless industry is set to witness a flurry of new entrants or network expansion by existing smaller players, resulting in 12-14 players in each circle from 5-6 at present. With the backing of experienced global and regional players and about $6 billion of initial funding committed by them, the new entrants appear well-poised for their initial rollout plans. Also, these players will have a shorter time to market and lower capacity expansion needs due to a predominantly shared infrastructure model.
 
However, average revenue per user (ARPU) of incremental subscribers—given that growth would now come from the ‘lower rungs of the economic pyramid’—is likely to be at a steep discount to the industry average, said IDFC-SSKI Securities Ltd, in a report.
 
As past experience suggests, the lowest ARPU is often reported by the latest entrant in any circle—for example, Aircel’s ARPU in Kolkata, launched in May 2008, Bihar and Himachal Pradesh, both launched in January 2007, is at a discount of 73%, 56% and 64% respectively to the average ARPU in these circles, the report added.
-Yogesh Sapkale news@moneylife.in
 
 

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Retail loan customers will receive balance statement once in a year
 
If the Reserve Bank of India (RBI) has its way, then retail loan customers of banks will soon be quoted a single, all-inclusive interest rate with no hidden charges or fees. This will allow them to work out their exact cost of borrowing and also allows for easy comparison across offerings by other banks and institutions. This is part of RBI Deputy Governor Dr K C Chakrabarty’s effort to bring transparency to the working of commercial banks. 
 
“Customers should get statements once in a year with all inclusive cost or annual effective rate (AER) which will cover interest rate comprising various elements of costing such as cost of funds, legal fees, inspection charges, switch-over fee, etc,” said Dr Chakrabarty, speaking to bankers recently. He wants to make the rules stringent and transparent for most of the services delivered by banks.
 
RBI has been receiving complaints about the unfairness of home loan rates, wherein most banks are reluctant to reduce interest rates for existing borrowers while new customers are offered lower rates. Dr Chakrabarty wants all existing customers to enjoy the current rate of interest and has asked RBI nodal officers to take up the issue with the head offices of various financial institutions. At the same Bhopal conference, he said, “When the cost of fund at a point of time reflects the floating rate offered at that time, how can it be different for different for two sets of borrowers?”
 
Speaking to Moneylife, Dr Chakrabarty said that many issues relating to retail lending happen because bankers are confused about who is the retail borrower. He says, “Ask 10 bank chairmen and each will define the retail borrower differently.” His own definition is very precise; he says, “banking for the individual, that is, for non-entrepreneurial activity is retail lending,” it has nothing to do with size. For instance a farmer is a small borrower, but he should not be confused with a retail borrower, because he is an entrepreneur. On the other hand credit cards, mortgage, auto loans are all retail loans and in all these cases, the recovery will not be from the asset that is created but from some other source of income. Once the definition is clear the next step is to ensure that pricing is transparent and non-discriminatory. Unfortunately this has not happened as yet.
 
Another area of concern for Dr Chakrabarty is to take banking to the masses. He points out that even today, 60% of the population does not have access to a bank account and he is more concerned about extending the reach of banking to these segments.
 
Speaking on the issue, a financial sector source told Moneylife, “We mostly receive complaints from existing customers since they cannot enjoy the benefit of the current reduced interest rate. But we also cannot pass on the benefit to the customers free of cost. That is because the interest on floating rates depends on the rate at which the institution is borrowing from the market. If the institution is borrowing at a lower rate, it will pass the benefit to the customers, if not, customers get angry. RBI is looking into the issue and trying to find a solution.”
 
Banks have also been asked to hasten the process of re-crediting customer accounts in case of a wrong debit. There are times when faulty ATMs do not allow customers to withdraw cash although it is debited from their accounts. Banks take as much as 12 days to re-credit the money when it ought to take only three working days now that most banks now have adopted core banking solutions (CBS) that allow money to be transferred within minutes from one account to another. 
 
 

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Future Brand plans big FMCG thrust
Future Brands, the fully owned subsidiary of the Pantaloon group, is looking at a growth of 60% in the fast moving consumer goods (FMCG) sector in FY 09-FY 10 by adding private brands to its portfolio.
 
“We will be looking at expanding our private label category by partly extending existing brands or coming up with new brands. Every year we at least add two-four brands of significant size and even this year we have similar plans,” said Santosh Desai, CEO, Future Brands. 
 
Future Brands has approximately 18 labels, such as  John Miller (apparel), Bare jeans, Buffalo (denim brands), Tasty Treat(snacks), Premium Harvest, Fresh & Pure, Care Mate and Clean Mate (food and home care segment), Dreamline (home segment) and Koryo (consumer durables), which contribute about 10%-15% of the group’s retail sales.
 
“We already have 18 brands across various categories which are our own brands that we manage under the Future Group,” said Desai.
 
He also informed that Future Brands is looking at the FMCG sector in a serious way for expansion. Besides FMCG, the company will also come up with private products in sports and sportswear and the home segment.
Pallabika Ganguly news@moneylife.in

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