Indian telecom operators profit to decline 85% in 2011-12

Telecom Lead India: 3G is set to take toll on the financial health of
Indian mobile industry. Profit after tax of Indian telecom services segment is
expected to decline 85 percent in 2011-12, according to India Government’s
Economic Survey.

The report said the significant decrease in profit is mainly
on account of the sharp rise in the industry’s interest outgo and higher
depreciation charges due to the heavy borrowings for acquiring 3G licences and
rolling out 3G services.

In India, all operators are reeling under pressure to
improve revenue and profit from 3G services which were rolled out in the last
18 months. Indian mobile operators paid around 1 lakh crore for buying both 3G
and BWA spectrum in 2010.

The India government report said growth in income from the
telecom services segment is expected to be 8.7 percent in 2011-12 and 10.6
percent in 2012-13. During 2010-11, telecom services revenue grew 10.5 percent.

Hyper competition is the main reason for marginal decline in
growth between 2010-11 and 2011-12.

It noted that the Indian telecom sector has witnessed
tremendous growth over the past decade. Today, the Indian telecom network is
the second largest in the world after China. A liberal policy regime and
involvement of the private sector have played an important role in transforming
this sector. The total number of telephones has increased from 429.73 million
on 31st March 2009 to 926.55 million on 31st December 2011.

The growth of wireless connections has been phenomenal,
reaching 893.86 million connections at the end of December 2011. As a result,
the share of wireless telephones has increased from 80.3 per cent in March 2007
to 96.4 percent in December 2011. However, the growth of wire line connections
has been decreasing every year.

India telecom revenue increased at a CAGR of 18.1% during

India’s telecom revenue increased at a CAGR of 18.1 percent
during 2006-10, according to Research and Markets.

The dynamic growth the country witnessed over the past
several years is mainly attributed to the robust telecom infrastructure,
various proactive initiatives taken by the industry and the Government, along
with liberal policies and a fair regulatory framework that helps offer telecom
services at affordable prices.

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