Telenor’s participation in auction is not good for Idea, RCOM and Vodafone

Aggressive participation by Telenor in upcoming 900 MHz auctions planned in 2015 could have negative implications for operators like Idea/RCOM/Vodafone says Credit Suisse.

Telenor has also started stepping up capex in recent quarters which is not good for incumbent operators. The company could be looking to fix its lack of 3G spectrum by buying 900 MHz spectrum in some of these circles says Sunil Tirumalai, vice president, Credit Suisse.

In last 18 months, Telenor has largely held on to its RPM (revenue per minute) during which Bharti’s voice RPM has expanded more than 8 percent. In turn, the company has seen its market share within its six operating circles expand to over 6 percent and touching 9 percent in a couple of circles. Interestingly, the company’s absolute revenue base and nation wide market share (with 6 circles today) are at or above peak levels seen before its 13 circle licenses were cancelled in 2012.

The steady tariff increases over the last few quarters have resulted in the industry probably enjoying unprecedented high profitability levels – only that this profitability is not visible in reported numbers of listed large telcos for a variety of factors. For the smaller operators who are the most leveraged to RPM changes have followed larger operators on tariff increases would have seen strong improvement in profitability, while those who have held on to tariffs would have seen increase in market share – also leading to profitability increase.

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