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Feb 06, 2013, 09.42 AM IST
On the sidelines of the HSBC India Investor Conference, Himanshu Kapania, MD of Idea Cellular told CNBC-TV18, India continues to be a strong voice market. He further added it would be speculative right now to comment on revision of headline tariff.
As the overall industry minutes grow, as Idea’s competitive position grows & as low price operators reduce their presence; our overall minutes growth will continue to be strong.
On the sidelines of the HSBC India Investor Conference, Himanshu Kapania, MD of Idea Cellular told CNBC-TV18, India continues to be a strong voice market.
He further added it would be speculative right now to comment on revision of headline tariff. The voice realized rate in Q3 was 34 paisa per minute, which should have been 43-44 paisa per minute, so there is a gap between the actual headline tariff and the actual realised rate.
However able to improve realised rate for voice by reducing discounts and promotions, he asserted
"We are extremely hopeful and optimistic that going forward in next four to six quarters, there should be an upward movement not only in terms of voice but also in terms of value added services, especially data and its overall percentage in our gross revenue," he added.
Below is the edited transcript of his interview on CNBC-TV18
Q: What is the expectation in terms of tariff increases and what would your outlook with regards to rate per minutes (RPM’s) be going forward?
A: We believe it is very speculative and it is not fair for us to comment on revision of headline tariff. However, to analyse the market for the benefit of your investors; as you are aware, our headline tariff is 1.2 paisa per second. If you translate into minutes it is Rs 0.72 per minute. If there is 50 percent outgoing and 50 percent incoming, all that put together our voice realised rate should have been 43 paisa to 44 paisa per minute at the current headline rate.
Our quarterly reported numbers only for voice realised rate is about 34 paisa. So, there is a gap that currently exists between headline tariff and to actual realised rate anywhere between 9 to 10 paisa per minute. Therefore now the focus of telecom companies is to reduce the promotions that we give for acquiring new subscribers. This has been led not by companies like ours but by low price operators which are reducing the promotions in the market place and everybody in the telecom sector is accordingly adjusting towards it.
There is already a lot of scope without changing headline tariff to be able to improve realised rate for voice. It would be speculative to discuss headline tariff at this point of time.
Q: I take your point, but as you point out already operators have started reducing promotions and discounts considerably. Do you think there is more scope to reduce discounts?
A: It is not possible for any company to be able to make forecast into the future. There are lots of dynamics in the market place. As you are aware after 2008 licence release, the number of operators in the country went up from 6 to 16. However, post the November auctions, the number of operators has fallen down back to six in number of markets and in some market it is eight. It is our belief that the over capacity phase is coming to an inevitable end, as the overall minutes and visitor location register (VLR) of the sector continues to grow. With reduced investment by new operators and in fact shrinkage of coverage by number of these operators, the over capacity in the sector is reducing.
The driving force for the final realised rate is the total capacity that is offered versus total demand. So, it is a demand-supply is going to be the factor that is going to decide the final realised rate. We are extremely hopeful and optimistic that going forward in next four to six quarters, there should be an upward movement not only in terms of voice but also in terms of value added services especially data and its overall percentage in our gross revenue.
Q: Volume growth seems to have bounced back to over five percent. What is the run rate that we can expect with regards to volumes going forward?
A: To study the volume growth, you have to see two things. First, we have always maintained that India continues to be a strong voice market and there is still a lot of juice in the voice business. Due to the correction of the discounts in the market place, there have been three to four months of decline in subscribers. Our belief is that in the long run VLR growth will be back as the number of multi-sim users are falling and first tine users is increasing in the market place. Second, we believe the industry minutes will continue to bounce back and will continue to grow.
Idea is overall improving its competitive position. While it has a revenue market share of 14.3 percent and VLR share of 15.8 percent but its minutes share is only 13 percent. So, as the overall industry minutes grow, as Idea’s competitive position grows, as low price operators reduce their presence in the market place, we remain bullish that our overall minute’s market share and overall minutes growth will continue to be strong for Idea.
Q: Some robustness is returning to the bottom-line and some moderation is returning to auctions. So, will Idea participate in the coming auctions?
A: It is a little premature. The government has just announced the terms. We are waiting for lot of clarifications and then based on the overall terms available to us, we will take a call.
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