COAI, the lobby of GSM operators, has asked the telecom department not to issue exclusive series to Reliance Jio and restrict it to 10 lakh per circle as per the DoT norms for new entrant
Cellular Operators Association (COAI)—the lobby of GSM operators—on Thursday has asked the Department of Telecom (DoT) to allocate only 10 lakh numbers without any exclusive series to Reliance Jio Infocomm Ltd (RJIL), the new entrant in telecom space.
COAI, in a letter sent to DoT secretary MF Farooqui, said, "“We submit that there is an existing guideline set by DoT for allocation of numbers... When a service provider starts the services, they are allocated one million numbers in each circle of operation."
The Reliance group company has reportedly demanded four crore numbers for starting its telecom services in the country.
“We submit that in the current scenario of multiple operators and explosive subscriber growth, considering the constraints in the numbering resources there is a great need to see that all the levels are utilised efficiently and there is no wastage of the important resource,” COAI said.
According to COAI, existing guideline should be applicable for all the service providers and this should continue to be applicable to any new licensees. RJIL should not be allocated exclusive numbering series in order to maintain a level playing field, it said.
Last month, Reliance Jio Infocomm has got a unified telecom licence that will enable it to offer voice telephony and high speed data services across the country. The Reliance group unit is the only operator that holds a pan-India spectrum for 4G services.
"With grant of unified license, RJIL has migrated its existing ISP license along with broadband wireless access (BWA) spectrum to the unified license with authorisation for all services, except global mobile personal communication by satellite service (GMPCS) under unified license in all service areas," RJIL had said in a release in October 2013.
The company has shown its intention to provide phone call services using radiowaves it has and is testing the technology for the same.
The industry body said any changes will be against the level playing field as all the other service providers are following the existing rules set by DoT. “Hence, Reliance Jio Infocomm should be allocated only one million numbers per circle of their operations,” COAI added.
Due to the intense competition, and rising expenses post 3G and MNP, Indian telcos will have to either consolidate or diversify in order to survive, says Fitch
Ratings agency Fitch said, the overcapacity in Indian telecom sector would decline over 2014-15 because some of the weaker, smaller telecom players are likely to be either acquired by larger ones, or to merge with each other to improve their financial and operating position.
"Smaller telcos in India continue to struggle to gain market share or achieve positive EBITDA. Their strategy of relying on the fast-growing data market is no longer working, as they are unable to achieve meaningful scale and generate significant profit from the segment amid competition from larger telcos," the ratings agency said in a research report.
At present, merger and acquisition (M&A) in telecom sector is not allowed. Lack of clarity over the telco M&A regime and, in particular, spectrum acquisitions have prevented any consolidation in India so far. However, Fitch says India would announce relaxation in M&A guidelines in telecom sector by the end of this year.
While it is said that some new entrants are easy prey for bigger, cash-rich players like Bharti Airtel, there are incumbents who may be ready to sell their part or complete business. On the one hand, telecom players are seeking to de-leverage their balance sheet through sale of their non-core assets, on the other some players are also following the footsteps of Bharti Airtel in diversifying their presence in other regions outside India.
According to the note, consolidation in telecom sector should improve operating profitability and cash flow of players, but such transactions could weaken the balance sheets of the acquirers if funded by debt. Consequently, mergers of strugglers may have to be all-equity deals to retain sufficient credit capacity to support ongoing operations, it said.
Fitch expect the consolidation to improve small telcos' declining profitability as cost synergies are realised and voice tariffs benefit from lower competition. It said, "Mergers should also lead to lower capex as network infrastructure investments need not be duplicated. Less intensive price competition in the data segment should benefit all. This is particularly important, as the revenue share of lower-margin data products is increasing - as it cannibalises the more profitable voice and text services."
The Indian market is less profitable and more fragmented, and the top three telcos have relatively weaker balance sheets - which are more likely to be adversely affected by debt-funded acquisitions. "We believe that, in the long run, India can support only six profitable mobile telcos. The market is currently characterised by fierce competition, with eight to 10 operators. Only the top (three to four) operators make a profit, while the rest suffer EBITDA losses and have stretched balance sheets," Fitch added.
You may also want to read...
How did equity fund sales for the retail investor category beyond the top 15 cities grow 16.38% in H1FY14 over H1FY13, when all other investor categories reported a decline?
Mutual fund houses have been consistently reporting the fall in gross sales of equity mutual funds over the past few months. Equity mutual fund sales fell by 8.48% to Rs16,544 crore in H1FY14 compared to Rs18,077 crore in H1FY13, according to CAMS MFDEx data. However, the gross sales for beyond the top 15 cities (B15 cities) rose a staggering 8.83% to Rs4,590 crore in H1FY14 from Rs3,942 crore in H1FY13, while equity mutual fund gross sales for the top 15 (T15) declined by 15.43% to Rs11,954 crore in H1FY14 compared to Rs14,135 crore in H1FY13. This leads us to the question we had asked a year back— Are some fund houses taking advantage of SEBI’s sloppiness to pick investors’ pockets? Here we had mentioned that some mutual fund houses are re-routing applications of the top 15 cities through other cities to claim the additional expense ratio at the expense of retail investors. On analysing the data further, it could also mean mutual fund houses are paying a higher upfront commission to national distributors for sales in B15 cities.
Retail equity mutual fund sales growth for the B15 cities rose an astonishing 16.38% for H1FY14 over H1FY13, while all other investor categories in the B15 cities reported a decline in equity mutual fund sales over the period analysed. All investor categories, even for the T15 citites, registered a decline in equity mutual fund sales. What led to a boost in mutual fund sales? Was it aggressive sales by the mutual fund houses? If it was, why did the sales of the other investor categories register a degrowth in sales. Effective marketing should lead to a growth in other categories as well. So is it true that mutual fund houses are rerouting applications? Is the regulator watching?
Is it possible to know which mutual fund distributor category led to a sharp increase in sales in the B15 cities? On analysing the mutual fund equity gross sales by distributor category we find that for the B15 cities national distributors reported a sharp 62% rise in sales. The category of other distributors reported a 59% growth in sales. Both these category of distributors reported a declined in sales in T15 cities.
We have mentioned in the past how mutual fund houses promote their schemes by paying a high upfront commission to distributors. Mutual fund houses usually pay 0.70% to 6.5% as upfront commission to distributors to push their equity schemes. This is an additional amount of money which mutual fund houses pay from their own pockets to distributors. After the new regulations, it has been reported that many mutual fund houses have revised their commission structure for distributors in B15 to incentivize them to get more retail investors. Influential mutual fund distributors are also said to get a far higher upfront commission than what a small mutual fund distributor gets. Is this a reason for the sharp increase in sales for national mutual fund distributors?
Before this regulation came in force from 1 October, Moneylife had mentioned that the calculation is complicated and there is low accountability. (Read: Mutual funds to be expensive from 1st October). The Association of Mutual Funds in India (AMFI) refused to divulge any information on this when we had contacted them last year.
It is also pertinent to note that sales of direct plans for both T15 and B15 cities more than doubled. For the T15 and B15 cities, direct plans brought in Rs1,678 crore and Rs424 crore respectively in H1FY14 compared to Rs771 crore and Rs198 crore in H1FY13.