Telecom Lead Asia: Indian mobile operators’ intention to spend (Capex) around $5 billion to $6 billion – which is significantly low as compared with global operators in Asia — in 2013 will impact 3G and 4G growth in India in the next 2 years.
Telecom operators such as Bharti Airtel, Reliance Jio Infocomm, Aircel, Videocon, Tikona, etc. do not have major expansion plans in 4G / TD-LTE this year.
Also, 3G operators — Vodafone, Reliance Communications, Idea Cellular, Tata Teleservices, BSNL, MTNL, Airtel, Aircel, etc. — are not expanding in a big way due to the weak business conditions and regulatory uncertainties that started in 2010-11.
Lower Capex has already impacted revenue growth of telecom equipment vendors such as Ericsson, Nokia Siemens Networks, Alcatel-Lucent, ZTE, Huawei, Samsung, Cisco, etc.
Besides lower Capex plans and 2G spectrum scam, the roll out obligations mentioned in the amendments of Unified Access Service (UAS)/Cellular Mobile Telephone Service license agreements to use 3G/ BWA spectrum also impacted the growth plans.
As per the roll out obligations, telecom operators need to to provide street level coverage using the 3G and BWA spectrum in at least 90 percent of the service area within five years of the effective date.
Interestingly, there are no stringent conditions for telecom operators that can force them to spend heavily in India – using the precious spectrum that they bought in 2010 – and roll out services in the first 2-3 years. All roll out guidelines are talking about targets for five years.
This means, if mobile operators do not roll out 3G and BWA (TD-LTE) in first 4 years, nothing will happen to wireless operators. India will continue to suffer from lack of mobile broadband.
However, in five years time, telecom players need to achieve certain guidelines.
In view of the 3G/BWA rollout obligation conditions, the earliest date to meet the required rollout obligations is 31.08.2015, said Milind Deora, minister of State for Communications and IT.
Indian telecom firms will invest a significantly lower proportion of their revenues (around 17-19 percent of revenue) over the next two years than their Chinese, Indonesian and Philippine peers, according to Fitch Ratings. This is due to the weaker balance sheets of the Indian operators.
For example, Chinese telecom firms have raised their 2013 Capex forecasts by 12 percent to 15 percent.
The Chinese and Indonesian telecom operators will spend 30 percent of their revenue at around $55-$60 billion and $4-$5 billion, respectively. Mobile service providers in the Philippines will spend 21 percent of revenue at $1-$1.5 billion.
The average funds flow from operations-adjusted net leverage for large Indian telcos is around 3.0x-5.0x versus 1.5x for the Chinese and 1.0x-2.0x for the Philippine and major Indonesian telcos.”
Capex per subscriber for Indian telcos is much lower at $6 per subscriber than Chinese operators whose investment is an average of over $50 per subscriber. Operators in Indonesia and the Philippines have an investment of $16 per subscriber.
Subscribers per MHz of spectrum per operator are about 10-15 million for Indian telcos compared with 5-6 million for Chinese, Philippine and Indonesian telcos, which also indicates that Indian telcos may need to invest more to decongest their networks.
Baburajan K