According to a survey by Voice&Data, a telecom industry journal owned by CyberMedia India, the Indian telecom services industry that braved the recession of 2008-09 to grow at 20 per cent, bowed to internal competitive forces in 2009-10. It grew by just 2.5 per cent to post revenues of Rs1,59,510 crore, against the Rs 1,55,683 crore of 2008-09.
The intense tariff war caused a steep fall and slowdown in performance across segments, including cellular services that have led the growth of the telecom services sector.
"This is the worst telecom services revenue growth in the last five years. More tariff wars are not sustainable. There is likely to be consolidation ahead. The 3G rollout and rising broadband penetration, including wireless broadband, will also help improve service revenue — but the impact will be felt more in 2011-12 than immediately," said Prasanto Roy, chief editor, CyberMedia India.
Despite a near 50 per cent subscriber growth, the mobile services segment grew a meagre 3.6 per cent to Rs 96,860 crore from Rs 93,522 crore. It had grown at 36.4 per cent just two years ago.
The tariff cuts and introduction of one paisa per second calling, introduced by the new players, forced leading players to also cut tariff.
The next 12-18 months are likely to be extremely challenging. "Competition for market share is likely to grow at a scorching pace, leading to shrinkage of margins. Big investments in acquiring 3G and BWA spectrum have already sent operators back to the drawing board. The rollout of 3G services too will need significant investments in equipment," said Ibrahim Ahmad, group editor of Voice&Data.