Television

TRAI study reveals telecom sectors growing pains

http://www.indiantelevision.com/sites/drupal7.indiantelevision.co.in/files/styles/smartcrop_800x800/public/images/tv-images/2015/09/15/TRAI.jpg?itok=shRGgiSr

MUMBAI: With foreign promoters increasing their stakes or purchasing the stakes of Indian promoters in telecom companies such as Aircel, Unitech, Sistema Shyam, Bharti Airtel and Vodafone, the latter’s total shareholding of major telecom access providing companies has dropped from 59.77 per cent in the year 2007-08 to 40.42 per cent in 2011-12.  A study paper released today by the Telecom Regulatory Authority of India (TRAI) on shareholding, financing and capital pattern of Indian private telecom access service providers (TSPs) has revealed this.

It attempts to provide an overview of the capital structures (deployment of funds in the form of owners’ equity and loan fund) of companies operating in the telecom sector based on the annual accounts and other information provided by 24 Private Telecom Access Service Providers.

The study paper also points out that while the share of Indian promoters in the equity shareholding declined from 59.70 per cent in 2007-08 to 56.63 per cent in 2011-12, the share of the foreign promoters has increased from 5.30 per cent to 13.90 per cent in the same period. So while Unitech, Tata and Vodafone have reported a decline in Indian promoters’ equity, Bharti, Unitech, Tata, Sistema Shyam, Loop and Vodafone have seen an increase in the stake of foreign promoters in equity shareholding.

The study paper is a comparative study of facts in the year 2007-2008 and 2011-2012. The trend indicates that the preference shareholding of Indian promoters and others has declined from 60.89 per cent (2007-08) to 2.62 per cent (2011-12). This decline is mainly in the case of the Tata group. The share of the foreign promoters in the total preference shareholding has gone up sharply from 0.59 per cent to 95.84 per cent. The increase in foreign promoter’s shareholding is Rs 5,988 crore and is mainly in the Aircel group.

Foreign currency loans for these companies have gone up from Rs 13,929 crore in 2007-08 to Rs 40,045 crore in 2011-12. The increase in foreign currency loans in 2008-09 over the previous year was attributed to the borrowings by Reliance Communications and Idea Cellular.  Reliance, Tata, Bharti Airtel and Idea have the major share (88 per cent) in foreign currency loans/bonds outstanding at the end of year 2011-12.

The study shows that Bharti, Vodafone and Reliance have not shown any change in their share capital.  Idea’s share capital has increased 26 per cent from Rs 2,635 crore in 2007-08 to Rs 3,309 crore in 2011-12, making it the only TSP showing that kind of growth. Total reserves and surplus in respect of Vodafone have declined from Rs 9,991 crore to Rs 2,975 crore, whereas the total reserves and surplus of other companies have shown an increase.  As on 31 March 2012, while Bharti, with Rs 50,470 crore had the highest reserves and surplus; Tata showed negative reserves and surplus of Rs 4,748 crore.

As on 31March 2012, Vodafone had the highest debt of Rs 45,332 crore followed by Reliance at Rs 31,195 crore and Tata at Rs 23,986 crore. Vodafone and Tata have shown persistent increase in debt during the past five years whereas the other three service providers have shown fluctuating trends in debt.

 The study also highlights the fall in EBITDA margins for almost all the TSPs over the past five years.  Bharti’s EBITDA has gone up from Rs 11,447 crore in 2007-08 to Rs 15,441 crore in 2011-12; however as a margin it has fallen from 41.96 per cent to 33.82 per cent. Vodafone’s and Reliance’s EBITDA has declined from Rs 6,247 crore and Rs 5,175 crore in 2007-08 to Rs 4,248  crore and Rs 3,018 crore in 2011-12 respectively.

Vodafone’s PBIT has declined very sharply from Rs 3,473 crore in 2007-08 to Rs 27 crore in 2011-12 while Tata’s has been negative throughout the period and has declined progressively from a negative Rs 1,194 crore to a negative Rs 2,275 crore over the past five years.  Ditto with Reliance which has seen its PBIT fall during 2008-09 and become negative in 2009-10 and 2010-11; however it has improved and become positive in 2011-12.

The study talks about the problems plaguing the TSP sector.  It says that “After their initial success, the Indian telecom companies are confronted today with serious growth challenges. The sector is characterised by mounting competition, declining average revenue per user (ARPUs) and rising costs. All these factors have put tremendous pressure on operating margins. The main reason cited by telecom service providers for declining profitability are their inability to pass on cost inflation due to hike in the price of power and fuel, debt servicing burden and the declining value of the rupee. This has been further aggravated by the prevalent tariff competition.”

It goes on to add:  “Each telecom service provider is endeavoring to focus on growth and investment, improvement of profitability and cost control without compromising on the quality of service to the customer.  Of the several strategies being adopted by the sector to witness growth include: focus on development of network and eco-system for 3G and 4G services; shifting towards outsourcing model where various medium and long term leasing arrangements for towers and other network infrastructure have been made with the third party operators or equipment vendors; maximising share of passive infrastructure in the short-term and initiating efforts to share active infrastructure over the longer term etc.”

The study concludes that the low market tariffs and the presence of large number of service providers in each licence service area have caused profitability to decline and made the telecom sector less attractive for infusion of equity.

New investments are therefore being financed through debt. Sector indebtedness is growing.  However, the sector’s debt-equity ratio has not as yet reached alarming proportions. On the other hand, the declining profitability of the sector, which lies at the root of the inability to attract fresh investment, is a cause for deep concern.

The study also indicates that some portion of debt is being utilised for interest payments and other liabilities rather than for acquisition of new assets, which potentially places the companies in a debt trap. Replacing debt financing by equity financing could help increase profitability by reducing the interest burden.

The report published by the TRAI also says that in order to turn around the financing pattern and the deteriorating profitability position of the sector, apart from measures and strategies of individual companies, clarity needs to emerge on the following policy issues and optimal utilization of resources:

 · Emergence of an enabling environment for mergers and acquisitions to aid in market consolidation;

· Permission and policy framework for sharing, trading and sale of underutilised or unutilised spectrum by service providers so that spectrum is optimally utilised;

 · Liberalisation of spectrum usage to enable flexibility in deployment of alternative technologies;

 · Improvement in the availability of power to run telecom networks so that network operations require less fuel and captive power generation.

Latest Reads

http://www.indiantelevision.com/sites/drupal7.indiantelevision.co.in/files/styles/340x340/public/images/tv-images/2017/02/25/ceo-uday_1.jpg?itok=8vKqyGy5
Conviction comes from the society & your country, says Star India's Uday Shankar, E&Y's 'Entrepreneurial CEO' award-winner

MUMBAI: "The conviction comes from the society, the world and the country you live in," Star India chairman and CEO Uday Shankar said on winning the "Entrepreneurial CEO' award of the year 2016 by EY, the consulting firm formerly known as Ernst & Young.

Television TV Channels GECs
http://www.indiantelevision.com/sites/drupal7.indiantelevision.co.in/files/styles/340x340/public/images/tv-images/2017/02/25/supriya-sahu-Tan%20Boon%20Siong-800x800.jpg?itok=FWFh7bOd
Doordarshan employs German innovator for upgrading news studios

MUMBAI: India’s largest broadcast operation, Doordarshan (DD) reaches around 92% of the population and 81% of its territory. Government-funded, it is also the largest terrestrial network in the world, and among the largest in terms of studios and transmitters with more than 90 studios and relay...

Television TV Channels Terrestrial
http://www.indiantelevision.com/sites/drupal7.indiantelevision.co.in/files/styles/340x340/public/images/tv-images/2017/02/25/bedi_singh-Susan-Panuccio_0.jpg?itok=vhZlSjn5
Bedi, old-time Murdoch hand, departs News Corp

MUMBAI: News Corp has announced that Mr. Bedi A. Singh will be departing as the chief financial officer effective 1 March. Susan Panuccio, currently the chief financial officer of News Corp Australia, will become the new CFO.

Television TV Channels News Broadcasting
http://www.indiantelevision.com/sites/drupal7.indiantelevision.co.in/files/styles/340x340/public/images/tv-images/2017/02/25/Untitled-1.jpg?itok=xAXnlxcy
Big Ganga shows now available on ZEEL's OZee

MUMBAI: Nowadays, a marketing strategy simply wouldn't help a television channel succeed. It would need the right distribution strategy and a worthwhile social media presence. Lately, almost all channels are extending their availability digitally. From linear feed on television to pick and choose...

Television TV Channels GECs
http://www.indiantelevision.com/sites/drupal7.indiantelevision.co.in/files/styles/340x340/public/images/tv-images/2017/02/24/mn%3D%20%281%29.jpg?itok=62l960iv
MN+ to air its Oscar special property 'The Academy Club'

MUMBAI: MN+ is all geared up to air their Oscar special property The Academy Club that will leave the movie lover ecstatic with cinematic brilliance. The channel will air this property on 25 and 26 February, throughout the day.

Television TV Channels English Entertainment
http://www.indiantelevision.com/sites/drupal7.indiantelevision.co.in/files/styles/340x340/public/images/tv-images/2017/02/24/Nexa-P1-Powerboat_1.jpg?itok=Ada8vEtF
Sony Pix & ESPN to telecast Global Powerboat Racing live from 3-5 March

MUMBAI: Nexa P1 Powerboat, Indian Grand Prix of the Seas, will be telecast live globally and promises to deliver the most comprehensive coverage in the history of powerboating. Seeding a global sport from India, the Nexa P1 Powerboat, Indian Grand Prix of the Seas, will set a global benchmark for...

Television TV Channels Sports
http://www.indiantelevision.com/sites/drupal7.indiantelevision.co.in/files/styles/340x340/public/images/tv-images/2017/02/24/Alan-Shearer.jpg?itok=kJa34ytE
Star to host Premier League movement on 2 & 3 March, legend Alan Shearer to participate

MUMBAI: The Football Movement, jointly hosted by India On Track, is being held in partnership with the Premier League’s Indian broadcast partner Star Sports. The conference will bring British and Indian football organisations and businesses together to discuss ways to continue to grow the...

Television TV Channels Sports
http://www.indiantelevision.com/sites/drupal7.indiantelevision.co.in/files/styles/340x340/public/images/tv-images/2017/02/24/naagin%202-800x800.jpg?itok=2sQq6fWi
Star Plus takes over Colors, Rishtey retains top position: BARC wk 7

MUMBAI: Star Plus pushed Colors to the second spot in Hindi GEC and Hindi GEC (Urban) genres in the BARC India ratings week 7 emerging on the top in these two categories. Rishtey retained its first position in the Hindi GEC (rural) category whereas Zee Anmol and Star Utsav respectively bagged the...

Television TV Channels Viewership
http://www.indiantelevision.com/sites/drupal7.indiantelevision.co.in/files/styles/340x340/public/images/tv-images/2017/02/24/Tarun%20Katial-800x800.jpg?itok=EAUMF-Io
RBNL all set to relaunch Big Magic

MUMBAI: Indeed, good decisions lead to great success.  Getting into the stable of one of India’s leading media conglomerates has opened up several opportunities for Reliance Broadcast Network Ltd (RBNL).   After the acquisition deal with ZEEL, RBNL is all set to relaunch its Hindi general...

Television TV Channels GECs

Latest News

Load More

Sign up for our Newsletter

subscribe for latest stories