The big three of Indian telecoms — Bharti Airtel, Vodafone India and Idea Cellular—are staring at a potential 3-3.5% month-on-month dip in revenues and smaller telcos, like Aircel and Telenor India, as much as 10%, post-demonetization if the liquidity situation does not improve in the next couple of weeks, analysts and industry experts said.
Telcos, which have already seen a sharp slump in the cash-driven mobile recharges business after the November 8 demonetization announcement, could also see a temporary fall in new customer acquisitions on both postpaid and prepaid platforms in the December quarter if the cash crunch turns out to be a prolonged affair, they said.
“Revenue for November could easily drop by a shade over 3% compared to October levels for a large telco if the cash shortage persists for another fortnight to a month,” a senior executive of a leading telco told ET.
The month-on-month revenue decline, he said, would be much higher, closer to 10% for smaller mobile operators.
Brokerage Citi Research backed the view, saying the impact on telco “revenues and service usage levels could worsen if the liquidity situation does not improve in the next 10-15 days”.
Analysts, in fact, expect incumbent telco revenues and Ebitda levels to take a hit in the fiscal third quarter if the month-on-month revenue dips spill over into December.
Industry experts and analysts also expect telcos to face temporary hiccups on the bill collections front with the likelihood of some payment defaults by postpaid users if the cash shortage persists. Some are not ruling out the possibility of mobile phone companies provisioning higher sums towards doubtful debts for the October-December period.
Bharti Airtel, Vodafone India, Idea Cellular, Reliance Communications, Telenor India and Aircel did not respond to ET’s queries until press time Thursday.
Industry experts also expect any prolonged dip in smartphone sales triggered by demonetization to hit data usage and data revenue growth in the December quarter. “If smartphone sales remain down for 30-45 days post-demonetization, it’s bound to have a negative impact on data revenue growth for incumbent carriers in the fiscal third quarter ending December,” Ajay Srinivasan, a Crisil Research director tracking the telecom sector, told ET.
The demonetization effect is slated to trigger a 10% fall in smartphone shipments to 28-29 million in the December quarter, Counterpoint Technology Market Research recently said.
Demonetization has come as a double whammy of sorts for mobile operators who are already grappling with the bruising impact of newest operator Reliance Jio Infocomm’s free voice and data services.
HSBC’s telecom analyst Rajiv Sharma said (incumbent) telcos could suffer an adverse impact in revenue growth in the December quarter due to “a combination of demonetization and the full quarter impact of Reliance Jio’s free data offering”.
Sharma said the adverse impact of demonetization would be felt by the telecom industry as “over 80% of mobile recharges are transacted via cash in many circles”.
Stung by the sharp drop in the prepaid mobile recharges business, mobile phone companies — both GSM and CDMA players — recently approached telecom secretary JS Deepak for a relaxation in demonetization rules for their retailers and distributors.
In a joint letter to Deepak, the Cellular Operators Association of India (COAI) and Association of Unified Telecom Service Providers of India (AUSPI) had on Wednesday suggested that telco retailers and distributors be allowed to accept defunct series of Rs 500 and Rs 1,000 currency notes, just as petrol pumps and utilities under the current demonetization exercise, since telecom is an essential service.
The COAI represents India’s biggest carriers such as Airtel, Vodafone and Idea while Auspi counts dual-tech operators such as RCom and Tata Teleservices, and pure CDMA players like Sistema Shyam Teleservices as its members.
But in a late evening development Thursday, the government provided some relief to the telecom industry by partly accepting its demand and allowing consumers with prepaid connections to do top-ups upto a maximum limit of Rs 500 each using older currency notes till December 15. This effectively allows telco retailers/distributors to do mobile recharges for prepaid users upto a limit of Rs 500 using demonetized currency. The move is likely to offer some relief to telcos and partly revive the mobile recharges business if the overall liquidity problem eases by December 15.
A visibly pleased COAI director general Rajan Mathews welcomed the government’s decision, saying the industry association is “pleased that the government had accepted its request and extended the date of doing mobile recharges (using demonetized currency) till December 15, which would be beneficial to prepaid users,” who account for nearly 95% of telco customers.
The COAI had requested the government to allow private telcos to accept demonetized Rs 500 and 1,000 currency notes until adequate replacement currency is available in the system.
“We had told the government that since it had earlier allowed state-run Bharat Sanchar Nigam (BSNL) to accept demonetized currency notes, it must extend the same privilege to private telco distributors/retailers in the interest of consumers, who have being unable to do mobile recharges due to paucity of cash, post-demonetization,” Mathews told ET.
He said COAI had also written to Telecom Minister Manoj Sinha recently reiterating its demand for a relaxation in demonetization rules to enable telco distributors and retailers to accept demonetized currency notes in the interest of cash-strapped consumers, who were finding it tough to do mobile recharges. (Source: ETTelecom)