Mobile telecom profits may dip due to stringent norms: COAI

Cellular Operators Association of India (COAI) Wednesday indicated that profits of mobile telecom industry may shrink further on account of strict subscriber verification norms and levy of charges on erection of cell towers by the state governments. Lack of infrastructure facilities in rural areas coupled with stringent norms of customer verification before providing services is a deterrent for mobile penetration in most parts of the country, COIA Director-General Rajan S. Mathews said.

Operators spend crores of rupees on customer verification process. Right now, activating one customer includes a minimum expense of Rs 600-700. Also, the state governments have started levying taxes on cell tower.

In Delhi, till recently they (state government) were charging 50,000 per tower. It has now further been enhanced to Rs 5 lakh. These are going to kill our profitability, Mathews said.

Some telecom operators are already incurring losses and the situation may further deteriorate with the new development, he said. "Net margins are currently at 8-10 per cent. This may drop by two-three per cent. Some operators are already in negative," Matthews said.

With the exception of a few companies, most of the operators reported dip in the net in Q2 this fiscal when compared to last year. Bharti Airtel Ltd, India's largest mobile-phone operator, reported a 27 per cent dip in net profit to Rs 1,660-crore in the second quarter earnings.

Similarly, Tata Teleservices Maharashtra Ltd's net profit of Rs 97 crore for the second quarter showed a decline of nine percent, compared to the Rs 107.9 crore net profit it earned in the corresponding period last year.

Last month, the dot draft norms, circulated in consultation with the Home Ministry, had asked all mobile operators to re-verify the documents of over 70 crore mobile connections in the country.

Recently, Mumbai police revealed that 60 pc of prepaid SIM cards were procured using fake documents in the city. The COAI has suggested to the government that the Unique Identification card should be set as bench mark for the customer verification.

"Government is trying to see what they can do. DOT and UID authority may coordinate in this regard for optimising the verification," Mathews said.

According to the data supplied by COAI, Rs 1,50,000 crore investments have been made into the industry so far, with a subscriber base of 700-million. India is one of the lowest-tariff countries. According to analysts, customer acquisition costs, due to Mobile Number Portability that is set to roll out in Haryana from November 25, are likely to rise as the acquiring operator (recipient) is unlikely to collect fees from the customer.

Edelweiss, a leading brokerage house, said (the recipient) will have to scrutinise the application and conduct the verification process at its own cost.

(Manorama)