Indian telecom stocks have been heavily hammered in the last few days. I was surprised.
Further to the pay-per-call, there was the 50 paise call and the discussion about possibility of mandate for per-call pulse that caused almost panic selling in the markets. It seems a hasty conclusion that all telecom is going to lose overall...
Following points need to be thought of in the context of Indian telecom scenario:
1. The ARPUs are falling but they still seem to be a function of the demand-supply equilibrium. Consider this, which markets are still untapped in India? Rural markets. The teledensity of rural ndia is far behind the urban. So the rural market is probably stimulated at a lower price and the industry is probably responding to that.
2. Commoditization is natural but this rural market would still allow the business to be a good business because of the volumes.
3. Now, in the recent times, operators have adopted several measures that are cutting costs like Infrastructure sharing, outsourcing their network operations etc.
If the operators are willing to pass this cost savings to customers, then that is actually good news for customers. Perhaps the demand generated by this will more than compensate the reduction in revenues.
4. The 3G scenario has still not even started. I am sure every operator definitely would have a strategy for 3G. They will find new ways to generate interest in 3G apps in the urban market. Particularly, business customers and the youth segment.
5. Operators are also trying to unlock value by spinning off businesses like tower business etc.
Considering this, I thought it was a little premature to assume that telecom story is over. I would rather wait and watch.