Aircel may cut back operation in few circles: Report

MUMBAI: Indian telecoms operators may see their realized rates, the amount realized by an operator on a per minute of call usage, improve by more than 20%, said a report by an equities research firm. However, improvement in realizations may not impact usage, as there is significant room for an increase in the average revenue per user (ARPU) per capita, the report said. Higher realizations may aid growth in ebitda margins and earnings, Avendus India Equity Research said in its report released Monday.

Avendus said according to its analysis mobile operators Aircel may cut back operations in few circles. However, operators like Tata Teleservices may resort to tariff hikes.Profitable players like the GSM incumbents are likely to benefit through either gain in minutes market share and/or raising tariffs. Over the last year many operators such as Etisalat, STel and Batelco -- have already exited India post the Supreme Court order in February 2012 cancelling 122 mobile permits, while others like Uninor have exited many circles.

"Cash drought faced by most Indian telecos has increased the likelihood of sustained improvement in realisations. Key Indian telecom players may require realisations to increase between 20% and 92% for specific financial goals, ranging from conducting profitable operations to generating higher return on capital employed for consolidated businesses. For a 20% increase in realisations, headline tariffs may not require a revision," the report said. Operational losses, and funding of 3G and BWA auction wins have led to significant high debt to equity for most mobile operators.

With growing losses, these telcos may need their promoters to infuse equity for continuing operations. While fund raising through asset sale or equity sale is becoming difficult, the possible strategy could be raising tariffs and/or cutting back operations, the Avendus report said.

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