Roaming charges removal may impact pricing of Bharti, Idea

The highlight of the draft Telecom Policy 2011 promotes the one nation-one license clause across services and service areas. This means that players will not require to bid for the various circles, instead, will be allowed to provide service across states and circles with just one license. Currently, there are 22 service areas in India.

While the guideline was aimed at increasing teledensity to 100% by 2020 from the current 74% and better services in the rural areas, it might well play out negatively for the telecom operators. Firstly, the clause would mean removal of roaming charges which presently contributes about 4-5% to domestic revenue for the players. This could impact FY13 earnings for the companies to the tune of 4-5% for Bharti and 8-9% for Idea. But according to Bhavesh Gandhi of IIFL, removal of roaming price was more or less expected of the Telecom Ministry and it cannot damage prices much. Secondly, new entrants to the sector lose out on the competitive edge of differentiating between their roaming and non-roaming customers, points out GV Giri of IIFL Institutional Equities. In fact, reviewing of roaming might lead to tariff revision by telecom operators. "If roaming chargers are removed on the home network, then depending on the elasticity of demand that is dominant for operating in that circle, they have the option of hiking tariffs," says Gandhi. Additionally, there will now be two separate categories of licenses, even as we adopt the one nation-one license policy. This essentially suggests that India will now move into a phase where the access license framework which is a unified framework, will further get expanded and will have two different networks of operation: One for service providers and the other would be a service delivery operator. Some say that this could add pressure on telcos in terms of the cost of migrating to this new license structure. Meanwhille, Sandeep Ladda, ED of PricewaterhouseCoopers believes that not making revenue as the primary objective of the policy could be a win-win situation from the government and industry standpoint. "This is important because the telecom sector is going to be granted an infrastructure status. If that is the case and we want to ramp up operations and companies make profits the government is going to draw its share of revenue from there," he added. As far as fiscal revenues are concerned, the government can derive it from these companies making profits. The move is positive in the sense that telecom companies will now be motivated to invest more in the sector than moving away. This will also aid in economic growth indirectly. Also watch the accompanying videos.