The rate war in the telecom industry sparked by Anil Ambani’s Reliance Communication (RCom) and the Telecom Regulatory Authority of India’s (Trai’s) move on per-second billing is taking its toll on share prices of leading service operators.

The share price of six telecom companies slid 3-10 per cent today after Trai Chairman JS Sarma said yesterday that it might ask all operators to consider the per-second pulse a mandatory option along with their other rate plans. The move could see erode revenues of telecom companies by up to 15 per cent.

Apart from this, RCom said after trading hours yesterday that it would offer a flat rate of 50p a minute for all calls on its network.

This will replace all existing schemes. Under the new “Simply Reliance Plan”, RCom will charge 50p per minute for all calls — local, STD, incoming and outgoing roaming — and SMS. The rates would be applicable for all calls. The move is likely to lead to a big rate war among telecom operators.

RCom fell 10.64 per cent to Rs 268.25 on the Bombay Stock Exchange (BSE). Bharti Airtel was down 10.22 per cent at Rs 259, Idea Cellular fell 8.29 per cent to Rs 64.75, Mahanagar Telephone Nigam declined 5.09 per cent to Rs 82.09 and Tata Teleservices Maharashtra was down 3.71 per cent to Rs 32.45. Sensex, on the other hand, was up 0.55 per cent.

“Telecom shares will be under pressure for a few quarters. Sales have already slowed at Reliance and Bharti as competition from Vodafone and entry by DoCoMo has intensified in the the world’s largest wireless market (by users) after China. Revenue growth is also seen easing as wireless subscriptions in urban areas are approaching saturation, forcing companies to target low-spending rural customers,” said an analyst at Mumbai-based research firm.

Under the “per second model”, a customer speaking for 20 seconds will only be charged 20 paise for the call rather than the full 60 paise that is charged currently. A study conducted by a foreign broker in August 2009 had put potential losses on account of the per-second-billing model at 10-15 per cent of the telecom industry revenues, which stood at around $21.5 billion in 2008.

At present, all operators, except Tata DoCoMo, Shyam Sistema and Aircel (in a few circles), follow a per-minute-billing system. Here, the customer is charged for the full minute irrespective of whether the call lasts the whole minute.

source: Business-Standard

Tags: Anil Ambani, rcom, telecom stocks

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