Key supply side cost drivers of telecom industry, understanding and benchmarking against other Indian operators: Uninor

Abstract

Indian Telecom industry is one of the fastest growing industries in world. It grew at a CAGR of more than 50% since March 2012 in terms of number of subscribers added. In the recent years, due to saturation in urban markets operators are moving into rural markets. Since the costs of operations in rural markets in higher than cost of operations in urban markets, a falling trend in the EBIDTA and PAT margins has been seen in the telecom industry since March, 2011. Since Indian telecom industry is highly competitive, tariffs cannot be raised to improve the margins. Due to declining margins and heavy pressure to keep the tariffs low, the only way to achieve positive profitability is to keep the costs low. As per studies, network operating costs contribute to a greater share of total operating costs especially in rural areas where they account for approx. 50% of total operating costs. So, in order to reduce the total operating costs, it is very important to control the network operating costs. In order to reduce network operating costs, it is very important to have a clear picture of the costs incurred by industry in general and a comparative analysis of the costs incurred by other operators. So, as part of this project, a comparative analysis of the key network operating costs for the major telecom operators in India has been carried out. Major network costs have been benchmarked and compared with the costs incurred by Uninor.