Worldwide Telecom Regulatory Body Should Consider Charging Spectrum Fee Linked With User ARPU

We all are aware that Spectrum is one of the most precious assets of any country and regulatory body faces uphill task to manage the balance within different segment of Industry and most importantly defence sector.

We are also well aware that the auction of 3G spectrum in Europe triggered Telecom initiated global recession in 2001 to 2004 wherein many Telecom service providers put in multibillion $ bet in auction with a view that data centric products and services will fly off without any problem. Unfortunately, the limitation of 3G supported devices, concern around device battery, and lack of coverage delayed the maturity time from 5 years to 10 years. On a contrary, Japan, South Korea, USA, and China succeeded in adopting it and user responded back with higher adoption.

Given the successful adoption of Technology and growth, many countries only adopt the procedure without digging down deep to understand geo political condition. None of the Telecom Networks run by any service providers cannot be successful without the maturity of ecosystem which is combination of services, platform and Applications as it is the building blocks of Telecom service provider revenue stream other than voice services.

For Example, China government control Telecom services through three entities and ensure that Telecom service providers are supported in all way. That is one of the reason that the implementation of home grown 3G and 4G standard being adopted by even global equipment supplier to ensure that they capture most lucrative market.

If we look at the APRU both on Voice and Data, I want to keep it to abstract level and want to mention Japan, USA, South Korea, China, Germany, Switzerland, UK as some of the countries where ARPU is generating high APRU on both voice and data front. One of the major reason of the same is the voice an data package bundled with device which help user to shell out minimum to acquire data centric service. While package gets over and user device gets unlocked by the Telecom service provider; user understand the true value of offered services and subscription success rate achieve higher percentage.

On a contrary, Developing and nascent stage countries trying to connect their citizen with telecom services identified it as an opportunity to raise funds for the government without analyzing the cascading impact on overall economy. India is one of the unique examples of the same. With every auction of spectrum, the regulatory body raised the base price per Mz and focused on the number of user instead of APRU generated by each user. It shocking to know that even African countries where Airtel is offering their service generating higher ARPU than India both on the voice and data side. In that scenario why we call African countries poor countries.  I failed to understand the higher base price for the spectrum. If regulatory body is so confident about the Telecom growth then I challenge Indian regulators to put their skin in the game and offer free spectrum to Telecom service provider and be a partner of all Telecom service provider. In my point of view, the developed countries based regulators should consider giving free spectrum and they should take the path of revenue share to ensure recurring revenue for the government.

In the current form of Government policy of auctioning spectrum plus charging hefty direct and indirect taxes on the Telecom service provider which is landing Telecom service provider into debt and it's not far away that they will crumble into another segment with higher NPA. Most interesting post auctioning the spectrum regulators should not interfere the voice and data pricing as it is contracting to their statement that spectrum auction is on the basis of market discovery.

In my point of view, Regulator should recommend the Government of different demographics to be part of the ecosystem and enjoy the growth as well as they should burn their fingers if losses popup. It will release higher free cash flow for the Telecom service provider which in turn will get circulated within ecosystem and will have huge driver for the continuous growth irrespective minor hurdles

Reader’s feedback will be highly appreciable.

Why One Should Invest In Bharti Airtel

Bharti Airtel equity in the last one year is living in artificial fear psychosis created by pundits about the entry of Reliance Jio. Reliance Jio last year successfully managed to get the license from government and can offer voice services. It impacted all listed Telecom Operators but Bharti Airtel was caught up in cross fire. Some of the Analyst talks about Airtel mounting debt level, some talk about their concern about upfront payout to government of India for just concluded spectrum auction, some talk about their Africa business, some talk about growing competition from Idea and Vodafone. I feel that in competitive economic environment, above mentioned points would always revolve around market leader but is it fair to create an environment of negative news by continuously talking about threats. I would like to highlight the following and would appreciate reader view

1. Who is the leader in the Indian telecom sector both on revenue and subscribers
2. Who commands highest ARPU in India
3. Who is generating maximum Cashflow
4. Who is generating maximum revenue from Mobile services
5. Who would get benefitted by lowered Spectrum usages charges
6. Who owns maximum Data user
7. Who is having one of the best data ARPU
8. Who is having minimum churn rate among the Incumbent
9. Who launched 4G in multiple cities
10. Who is maintaining continuous innovation in Product positioning
11. Who cleaned up their management within Six months with all new faces and having a guts to give well established business to a person from FMCG
12. Who is aggressive in Broadband services
13. Who spent Millions of $ in acquiring Qualcomm BWA without having plans for it

I must admit that Vodafone is the only competitor generating nearly same APRU like Bharti Airtel. On Bharti Airtel Africa business, one must be rest assured that once US picks then it will have cascading positive impact on Europe and other continents including Africa. Once that happen then the currently so called African operation would generate the same kind of result the way Jaguar is generating for struggling Tata Motors.

Regarding Reliance Jio entry into voice and data segment of telecom sector would carry no to little impact. I have been hearing for the last two and half year that Reliance Jio is near to launch but they are still on the design table. In my point of view, they are minimum 4 quarter away from full launch and by that time Bharti Airtel would sweep up license area with their 4G launch. One must not ignore that Bharti is having running system in place to do soft launch to realign infrastructure to refine the service defects but that’s not the case with Reliance Jio. The nearest competitor Vodafone and Idea is entangled with Tax authorities. Any tax penalty on both the companies would change their financial dynamics.

In conclusion, potential investor must read the analyst report from all leading analyst firm and their targets for Bharti ranges from 360 to 430 INR but they criticize Bharti Airtel when its trading below INR 310.

In conclusion, any investor must do their own analysis and invest particularly in the case of Bharti Airtel if they really wanna to get rewarded.