Are Telecom Operators losing money because of the Internet?
P.s: pls share any additional I can add to this presentation with me nixxin @ gmail.com . I’m a volunteer with www.savetheinternet.in
But first...
What is Net Neutrality?
Net Neutrality requires that the Internet be maintained as an open platform, on which network providers treat all content, applications and services equally, without discrimination.
नेट निष्पक्षता की यह आवश्यकता है की इंटरनेट का बुनियादी ढांचा खुला और मुक्त रहना चहिये, अौर नेटवर्क प्रदाता हर एक जानकारी, अनुप्रयोग, और सेवा को, बिना कोई भेद-भाव किये, बिल्कुल सामान तौर पर प्रदान करें
source: www.thisisnetneutrality.org , approved by global civil society orgs
What’s being done in India?
�An attempt to change the definition of Net Neutrality: When telecom operators say they support Net Neutrality, they mean that it is about network providers treating all Internet users as equal, without discrimination.
What’s being debated | Current status | What telcos want | What DoT committee wants | What Savetheinternet.in wants |
license for messaging apps | Not there | Yes | No | No |
license for calling apps | Not there | Yes | Yes, conditionally | No |
Speeding/slowing specific apps | Allowed (no law) | Yes | No | No (need law to prevent) |
Blocking some apps in plans or slicing apps into individual packs | Allowed (no law) | Yes | No | No (need law to prevent) |
Making some apps cheaper, some more expensive (incl Zero rating, like internet.org, Airtel Zero) | Allowed (no law) | Yes | Yes, conditionally | No (need law to prevent) |
Slowing down certain types of services to ensure network works | Allowed (no law) | Yes | Yes | Yes |
Net Neutrality implications for Websites and Apps | ||
Factor | Neutral (current) | Non Neutral |
Starting up | Very quick. No permissions required, apart from statutory requirements for registering a business. | Slow. Need permission from telecom operators to enable Internet access/speed/costing |
Carriage Fee | None | Yes. Negotiate carriage fee with each telecom operator separately. |
User relationship | Direct user relationship | Relationship with user depends on telecom operator. |
Ability to iterate and change models | Very quick | Re-enabling service depends on telecom operator (Mobile VAS experience: http://rashmiranjanpadhy.com/2015/04/12/airtel-kills-startups-and-innovation-a-real-story/ ) |
Competition | Based on product/service quality and cost to consumer, availability of funds | Based on telecom operator relationships, cost being charged by telecom operator, product/service quality, cost to consumer, availability of funds |
Net Neutrality implications for Consumers | ||
Factor | Neutral (current) | Non Neutral |
Access to knowledge | Diversity: Millions of websites to choose from. Access to everything | Only get access to those websites which pay or partner with the telecom operators. Most sites not available. |
Speed | All sites load at the same speed | Some sites load faster than others |
Payment | Pay for how much data you use, as per plan | Pay for what you use, or pay nothing for a few sites that partner with telcos. |
Access to global services | Access to all global sites | Under zero rating or packages, no access to global sites that don’t partner with telecom operators. |
Now on to the state of telecom operators�
1.
What do telecom operators tell their investors?
Are they losing money?
Do they think they’ll lose money?
Idea Cellular
“...in India it is expected that the impact on voice will be far lower than what impact we have seen in Europe and other parts of the world is because in India voice rates are among the lowest in the world. We are currently offering rates of 35 to 40 paisa per minute.”
“...we believe the bigger cannibalization is on international calling where the rates are higher and to some degree on NLD, but on local calls there is likely to be far lower cannibalization. ”
- Himanshu Kapania, Idea Cellular MD, July 22nd 2014�Source: here, Pg 23
Idea Cellular
“Our belief is that circuit switched voice (regular phone calling) is far superior to voice over IP (VoIP) technology, and the current quality of services (of VoIP) does not compete with the circuit switched quality that we offer”
“Will VoIP be able to take away a larger portion of Voice? We are not seeing that trend at this point of time, but we will keep reporting going forward on this. Please note that has not been seen in any part of the world as of now.”
- Himanshu Kapania, Idea Cellular MD, April 29th 2015�Source: here, Pg 27
Idea Cellular, more recently
VoIP (Internet Calling) is:
“Our general sense is, some cannibalization will happen and we will budget it in, but it is not something of a fearful nature that we have to worry about. What happened to SMS will not happen to voice given that it is an app-to-app call”
Airtel
“...on the cannibalization, there is still no evidence that suggests that there is cannibalization. Yes we have seen cannibalization coming on our SMS, the cannibalization that we see right at the top end, if at all there is some, is really not material so I would not like to say that there is cannibalization.”
Source: here, Pg 11
2.
Are telecom operators loss making?
Last 5 years
Total Income: Rs 210,447 Crores
Profit: Rs 34,569 Crores
Last 5 years
Total Revenue: Rs 96,520 Crores
Profit: Rs 5,554 Crores
Insert Vodafone chart here
Financials
Detailed analysis shows Operators are not losing money to data. On the contrary:
From Jun 2013 to Sep 2014:
Comparisons of ROE and ROCE show Indian companies aren’t exactly bleeding:
Company | Airtel (India) | Idea | Vodafone (worldwide) | AT&T |
Return on Equity | 17% | 14% | 9% | 6% |
Return on Capital Employed | 16% | 14%-16% | 14% | 7% |
3
Have they lost money because of Internet usage?
Data connections are growing!
only includes Airtel + Idea + Vodafone + Reliance Communications
Data usage is growing!
in billion MB
Data Revenues are growing for Airtel!
Rs 12,206 crores in 2 years
Data Revenues are growing for Idea too! Rs 8050 crores in 2 years.
VAS revenues, which include SMS, are growing too
4
But they paid so much for spectrum?
What about that?
But...
In Rs Crore | 900 MHz | 800 MHz | 1800 MHz | Total Cost |
Airtel | 22,255 | | 1,042 | 23,297 |
Idea | 27,640 | | 2,088 | 29,728 |
Vodafone | 21,234 | | 1,020 | 22,254 |
Reliance Jio | | 7,735 | | 7,735 |
Reliance Comm | 1,835 | 1,992 | 402 | 4,229 |
Payments due for Spectrum Auctions in 2015 (Source)
5.
Don’t telcos need money for infrastructure?
“The USOF levy should be gradually reduced to 1%, as we are now penetrating in rural areas.”
- Rajan Mathews, COAI (telecom industry association)
Nov 20th 2014. Source: here
(on investment in new towers for data growth)
“It is not material. There could be some requirement in a few places and a few cities but it is still a little early to say so we will assess that as we go forward. ”
- Gopal Vittal, Joint MD and CEO (India & SA), Bharti Airtel�Feb 5th, 2015
Source: here, Pg 11
Telcos invest when they see that they can make money
“...capex expenditure for us is ROI-led and we are allocating a larger capex because we believe the mobility services demand that we are estimating will be much higher than what we had witnessed in FY13 and FY14.”
�“Now the confidence is increasing because we feel there is sufficient ROI. I have to remind everybody that as far as Idea is concerned, for us the capex investment is ROI-led, and we believe there is a reason why we are increasing our guidance, because we believe there is sufficient ROI available, and this higher capex allocation will help us in our growth journey that we have set for ourselves.”
- Himanshu Kapania, Idea Cellular MD, April 29th 2015�Source: here,
6.
Why do the telecom operators want VoIP licensing?
But...
VoIP licensing in India: Current status
7.
How will licensing of VoIP impact you as a consumer?
Summary