Cash Crunch For Indian Mobile Firms

By siliconindia   |   Wednesday, 04 January 2012, 01:58 IST
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Bangalore: The mobile phone service providers in India are facing financial problems and hence are unable to develop infrastructure and are also facing government restrictions on equipment imports. This is limiting their ability to add users and is also hurting their fiscal growth.

According to Rajan S. Mathews, the Director General of the Cellular Operators Association of India, has put forward the reasons for that the FDI investment in telecom sector going down. The local banks have stopped lending, thus operations are rolling over debt and working capital has been heavily impacted. He said, “Liquidity is a ‘big issue’ for telecom companies.”

Mobile phone service providers are running through series of severe problems. The embedded charges, the policy switching schemes and the extreme race to be in the market, have all combined to blow off the shine out of the Indian Telecom industry which was once considered as a beam of economic reform. On the other hand Government has put a clause on the equipment import of telecom gear. The operators need to get a prior approval and thus the orders for telecom equipment has slowed down

China being the first, India is the second-largest market for wireless services consisting of 880 million users. Last year the count had a highest surplus of 15 million users per month, but gradually because of the technical problems of bandwidth, the voice quality became poorer and there were more call drops than usual, the market for the service providers became worse and the surplus of users has fallen to 7 million per month. Mathews expects this surplus to increase from 7 to 9 million users per month in 2012.

In 2012, it is expected that the gross revenue of the service providers will increase up to 15 percent, which was 13 percent last year. Mathews also stated that new users are tending not to switch but stay longer on networks. Thus the monthly average revenue per user is 135 to 165.