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Cheaper Roaming Rates to Hurt Telecos’ Profits

In India, the telecommunication market is dominated by Airtel with 29.9 % market share, Vodafone (23 %), Idea (15.7 %), Tata (8.2 %) and Reliance (7.8 %).  There is a growth of 3.7 % in the industry gross revenues.  A total of Rs 38,750 crore were earned in the last quarter of the FY-2012-’13. Telecom Regulatory Authority of India (TRAI) recently announced that the roaming rates will be slashed by at least 57 %. This news has made telecom services subscribers happy, but for major telecom players in the market, it will hurt their profits. However, the telecom companies are heaving a sigh of relief as the regulatory board had proposed to cut down the roaming rates completely. It decided against it lately, as they assessed that the situation was not “practicable at this point of time.”

The customers can avail free roaming by paying a certain amount of fee to the operator.  If one owns shares in telecom companies, there might be a dwindling effect because of impact on stocks. According to an estimation, if the roaming charges were completely abolished, the telecom companies would lose around Rs.1,800 - 2,200 crore. Currently, the earnings per share of telecom companies would experience low for about 2 to 4 percent.  This impact is not so huge as compared to downfall of 10 to 20 percent, if the roaming charges were waived of completely.


There will be minimal effects on roaming tariffs for subscribers. The roaming charges won’t undergo any huge downfall. The companies will have to offer two kinds of tariff plans for its customers: one with a fixed charge and another with no fixed charge but with high roaming rates. 


Kotak Securities is one of India’s largest share broking firm offering demat account, online trading, mutual fund and IPO investing service’s; along with a research division specializing in Sectoral Research and Company Specific Equity Research. Express your views on their Facebook Page and Twitter Handle (@KotakSecurities) or you can also visit for more information.
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