Thursday, 26 September 2013

Telecom Sector

Note: this post was originally written on 07/05/2013.
After the bloody war prompted by new entrants into telecom sector like videocon, aircell etc which saw pulse rates going down the hell...there are signs that this war is going to end soon because the notion “survival of the fittest” is best demonstrated in the field of commerce.

Big fishes like Airtel, Idea, Vodafone, Reliance had the strength and back up to absorb the long periods of falling profits and Revenue but not these small players. In the end, these big Fishes will eventually eat out its small counterparts.

But next wave of telecom story is not about Voice, pulse is about data. Reliance Industries is on the verge of launching its mega 4G network, starting with 3 cities and then expanding into all over india. And Mukesh Ambani has the fervour to do everything on grand scale, so his plans are to merge Voice, data and entertainment ...all three into one package and offer these to value conscious Indians at attractive prices but not at cheap prices like he did in 2003 with his 501/- rupees plans which proved disaster later on mainly on account of shabby back up operations which never paid much consideration to verify the user profiles resulting in Reliance Communications to write off around 4500 cr when it was handed over to Anil Ambani.

And there are ample signs that in the future these big fishes won’t engage in bloody price wars since after recent cross company dealings (Reliance Ind getting cable and tower connectivity on lease from Airtel and Rel comm) they have become the stakeholders in each other’s companies. And Reliance Ind and airtel has big plans to lay the undersea fibre optic cable of 8000 KM to connect various asian countries. They have realised that in order to survive gracefully they are better off as wise partners than fierce competitors.

However inspite of very low level of penetration of broadband (2 Cr) services, our rates are still very high, infact highest in the world. I think this is mainly due to non utilisation of broadband capacities, poor infrastructure. I see people buying expensive tablets and what they do with them, mostly for playing games, movies etc!!! but it is total waste of money unless we have reliable and cheap internet connections available. In USA 3G connectivity is 90%, in Japan 99%, china 16% (launched in 2009) but we are lagging at 4%. 3G was launched in USA in 2003, just to compare our growth story.
We are on the verge of an internet revolution. Already there is an increase in the online transactions, E-commerce is going for a big take off.

So i feel, our telecom companies are going to increase the voice rates, alongwith offering value for money data usage plans. With people using their handsets more for Data rather than voice, the scale of growth is huge. Even i find that Voice usage of my cellphone is almost half of that of data.

Hence , stocks of our telecom companies may get rerated within a year or may be earlier. I have already purchased Reliance Ind. But i am yet to study Airtel, Idea and rel communications.

However if anybody is having the shares of these companies picked at lower rates, then it is right time to add some or hold onto them. 


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