Telcos exiting country amid bleak telecom picture

While the optimist expects the mobile industry to grow further, going plainly by the sheer number of subscribers, a report clearly states that the nation’s rewritten rules and other factors have driven telecom operators out of the country. According to a Bloomberg report, the country has rewritten some tax rules and also canceled some 122 licenses. Among other things, the country, reportedly has also been recommending charging airwaves at 11 times the price. Bahrain Telecommunications Co. also known as Batelco left after the cancelation of its permit, while Emirates Telecommunications Corp., or Etisalat has closed its operations in India. Known telecom operators have also been suffering losses, and these include the shares of Bharti Airtel that reportedly dropped by 8.2 percent this year and that of Idea Cellular that dropped by 4.1 percent.

Goodbye telcos (Image credit: Getty Images)

“It has become a bit of a nightmare,” said Andrea Williams, who helps manage about $1 billion as head of European equities at Royal London Asset Management. “Expectations were higher for telecom than other Indian industries, but as of late we haven’t seen many decisions that have inspired a lot of confidence.”

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Vodafone, Bharti Airtel, Idea and Telenor have helped build the industry, as the markets opened in 1990. The graph of subscribers has been growing steadily since, with the number growing 158 times to 919 million, since 2001. The government may have lost as much as $31 billion in revenue, as the 2008 sale of permits lacked transparency. The country’s biggest corruption investigation led to the arrest of the then telecommunications minister, some bureaucrats and company executives. India scrapped about 122 phone licenses, including those of Batelco, Etisalat, Telenor and AFK Sistema (AFKS).

The most recent news also spoke about rise in call tariffs, if TRAI’s spectrum pricing proposal is accepted. “Indian operators have grown accustomed to certain prices, so this may seem harsh, but I’m confident that the industry will prevail,” TRAI Chairman J.S. Sarma was quoted as saying by the report. “Over a 20-year projection, these prices are more than manageable and we will give companies enough time to pay these prices,” he added.

“India is the main reason that investors are hesitant” about investing in Telenor, Saeed Baradar, an analyst at Societe Generale in London was quoted as saying by the report. He added,  “Removal of that fear will result in at least a 15 percent to 20 percent re-rating in the stock.”