India’s fast-growing telecom sector dials up trouble

NEW DELHI, November 8, 2009 (AFP) – India is still adding a staggering 15 million new mobile phone connections a month but the world’s fastest-growing cellular market has hit rough waters. A cut-throat price war is hammering down call charges, putting pressure on telecom companies’ earnings and share prices, and threatening a bruising shakeout in a sector that has become crowded with new players.

“The tariff reductions are hitting revenue growth and with new entrants, there’s less to go round for everyone,” said Religare Securities analyst Himanshu Shah.

Top Indian mobile phone firm Bharti this month announced a lower-than-expected 13-percent rise in quarterly net profit from a year earlier while profits halved at number two operator Reliance Communications.

Competition was already fierce but has become even more aggressive as new players unleash deeper price cuts with innovative per-second billing plans that have pushed call costs down to less than a cent a minute.

Some operators are offering rates as low as 0.01 rupees a second, or a fraction of a US cent.

The per-second billing was kicked off in June by the entry of Tata DoCoMo, a joint venture between I