Israeli police arrest telecom officials in graft case

Israeli police said Sunday they arrested senior officials from the country's national telephone company as part of an investigation into alleged corruption offenses. Israeli media said among those arrested were close associates of Israeli Prime Minister Benjamin Netanyahu who is fighting for his political life after being accused of taking bribes from billionaire supporters.

Police revealed few details about the case and quickly slapped a gag order on its details. But Israeli daily Haaretz reported that police are investigating a possible relationship between the company, Bezeq, its controlling shareholder Shaul Elovitch and Israeli Prime Minister Benjamin Netanyahu. According to Channel 2 TV, Netanyahu allegedly received favorable coverage from the Walla news site, a Bezeq subsidiary, in exchange for regulation that earned Elovitch hundreds of millions of shekels. The channel says two people arrested are Netanyahu associates and that Netanyahu, who held the communications portfolio until last year, is expected to be questioned.

Netanyahu denied wrongdoing, saying the accusations would amount to nothing and that they were part of a witch hunt by a hostile media.

Journalists from the Walla news site have indicated they were coerced to refrain from negative coverage of Netanyahu.

"I was witness to the despicable pattern in which this media outlet tried to suck up to Prime Minister Netanyahu," said Dov Gil-Har, a former Walla journalist. In a statement broadcast on his current TV show, Gil-Har said he tried to appeal to management but did not elaborate further because of the gag order.

The new probe comes days after police announced there was sufficient evidence to indict Netanyahu for bribery, fraud and breach of trust in two separate cases.

Netanyahu is accused of receiving lavish gifts from Hollywood mogul Arnon Milchan and Australian billionaire James Packer. In return, police say Netanyahu had operated on Milchan's behalf on U.S. visa matters, legislated a tax break and connected him with an Indian businessman.

In the second case, Netanyahu is accused of offering to give preferential treatment to a newspaper publisher in exchange for favorable coverage.

Netanyahu has denied wrongdoing in those cases.

Telecom companies may ring in stable 2018

The Indian telecom industry, having weathered one of its most turbulent years, is looking at a more stable twelve months where tariff wars will ease out, revenues from customers will increase, companies will assemble their merged entities and go slow on its shopping spree. The sector, with its three big players, will instead focus on data, innovative services and other forms of business within the industry keeping the customer in mind.

"2018 will be an important year for telcos and tower companies alike, as the national telecom policy (NTP 2018) will be unveiled, paving the way forward for a conducive ecosystem," said Rajan S Mathews, director general of Cellular Operators Association of India (COAI). He said that consolidation in the sector will take firm shape and eventually result in improved margins for the telcos.

"Telcos may also look to sell their tower assets to fund capex, which along with consolidatio ..

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Ofcom to introduce automatic compensation for telecoms service failures

Customers suffering poor landline and broadband services will be automatically compensated under a new scheme to be rolled out in 2019, though at lower rates than previously outlined

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Customers suffering poor landline and broadband services will be automatically compensated under a new scheme to be rolled out by the telecoms regulator Ofcom, though at lower rates than previously outlined.
Ofcom estimates under its proposals, to be rolled out in 2019, up to 2.6 million more landline and broadband customers could receive up to £142 million a year in new compensation payments.
This annual compensation estimate has fallen from £185 million Ofcom estimated in March when it launched its consultation, having now cut the compensation rates it will set across all three service areas identified.
The regulator had earlier proposed it would set compensation if a service isn't fixed within two days at £10 a day; £30 per missed appointment if an engineer fails to turn up for a scheduled appointment or cancels with less than 24 hours notice; and £6 a day for delays in a scheduled start date for services.
Those figures have now been revised downward to £8 a day if a service has been down two full working days; £25 per missed or late rescheduled appointment; and £5 per day for missing a service start date.
The regulator said as a result of its intervention, BT, Sky, TalkTalk, Virgin Media and Zen Internet – who together serve around 90 per cent of landline and broadband customers in the UK – have “agreed to introduce automatic compensation, which will reflect the harm consumers suffer when things go wrong”.
The regulator said it will continue to monitor the scheme, and will step if measures agreed are not fully implemented.
Lindsey Fussell, Ofcom’s consumer group director, said: “Waiting too long for your landline or broadband to be fixed is frustrating enough, without having to fight for compensation.
“So providers will have to pay money back automatically, whenever repairs or installations don’t happen on time, or an engineer doesn’t turn up.
“People will get the money they deserve, while providers will want to work harder to improve their service.”
Alex Neill, managing director of home services at Which?, said: “We are pleased that compensation for poor broadband is going to become automatic, as it is now such an essential part of all of our everyday lives.
“For all consumers to get what they're entitled to, it’s vital that all providers play fair and sign up to this scheme.”

Telecom players still feel Jio heat, reveals TRAI data for June quarter

The entry of a formidable player like Reliance Jio has turned the Indian telecommunication industry upside down. Jio’s freebies have intensified the price war leading to a steady decline in average revenue per user (ARPU) -- an important metric for telecommunication players.

 

 Nitin Agrawal

Moneycontrol Research
The entry of a formidable player like Reliance Jio has turned the Indian telecommunication industry upside down. Jio’s freebies have intensified the price war leading to a steady decline in average revenue per user (ARPU) -- an important metric for telecommunication players.
The intensity of the competition is being felt by the debt-laden incumbents, evident from their latest results compared to last year's. Industry dynamics will change drastically.
What does the latest TRAI data suggest?Recently, TRAI (Telecom Regulatory Authority of India) published financial data pertaining to gross revenues, adjusted gross revenues (AGR) and other parameters for the quarter ended June 2017. The data did not surprise us as it reflected the pain that incumbents have been highlighting.

For the understanding of our readers, AGR is calculated from gross revenues after adjusting for charges paid to other service providers, roaming revenues actually paid to other service providers, and service and sales tax paid to the government. Adjusted gross revenue ARPU is calculated by dividing AGR by the number of users and this is a measure of spending on telecom services per customer.
Competition shrinking the overall pieTelecommunication industry witnessed a significant decline of 13 percent (YoY) in gross revenues and 27 percent decline in AGR. The fall indicates that the customers are paying less for the services, primarily led by steep discounts offered by Jio and the response of the incumbents to these offers.
ARPUs decline continuesIndustry AGR ARPU also fell by 36 percent (YoY) and 7 percent (QoQ). It currently stands at Rs 80. A sequential fall in AGR ARPU indicates that the price war is far from over. In fact, we believe that the launch of the JioPhone might hurt incumbents further.
AGR for the top 3 players (Bharti Airtel, Idea and Vodafone) fell by 22 percent (YoY) in the quarter gone by and their ARPU fell by 28 percent (YoY) to Rs113.

Bharti – performance indicators not lending comfortBharti Airtel’s AGR fell 23 percent (YoY) to Rs 99 billion. However, it could gain 175 bps (YoY) in AGR market share on the back of 300bps market share gains in 900MHz circles. Airtel also witnessed a 30 percent (YoY) fall in its ARPU.

Idea and Vodafone – gaining market share at the cost of profitabilityIdea also witnessed a 21 percent (YoY) fall in its AGR. The fall was lower than Airtel on the back of higher conversion of AGR from gross revenue, perhaps with more calls landing in their own network. Idea’s AGR market share witnessed an uptick of 165bps (YoY). However, ARPU for Idea continued the downward trend with 29 percent (YoY) fall and stood at Rs 105.
Vodafone also posted a similar set of numbers. It witnessed a steep fall of 21 percent (YoY) in its AGR and 26 percent in ARPU. However, Vodafone’s gain of AGR market share was higher than Airtel and Idea. It rose by 180bps (YoY) and 60bps (QoQ) on the back of improved market share in the established circles.
Vodafone and Idea together have close to 46.8 percent AGR market share, much higher than the current leader, Airtel.

Jio- still in redJio’s AGR stood at a negative Rs 10 billion led by payment of Rs 21.5 billion access and other charges. Any decision to lower IUC (Interconnection Usage Charges) – the charges paid to the other networks to complete calls -- would be a big boost to its business. Jio’s AGR market share is also negative and currently stands at a negative 3.7 percent.
Will Jio’s monetisation efforts help the industry?The good news for the industry is that after intensifying the price war by providing freebies, Jio is now moving towards monetising its customer base, which stands at 123 million at the end of June-2017 (up from 108.9 million in March 2017). It is likely to adopt a balanced approach between revenue growth and subscriber additions.
The company has recently outlined new plans wherein it has reduced the validity indicating an uptick in ARPU (average revenue per user). The most prominent plan of Rs399 for 84 days validity translates into an ARPU of close to Rs 124, up from Rs 94 based on the earlier plan (Rs 309 for 84 days).
The price war has already eliminated the marginal players. With the stronger entities left in the fray, the industry can look forward to a relatively more rational competition, although not before a couple of more years of turbulence.
(Disclosure : Reliance Industries is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd)

Care Ratings: Cut in telecom revenue target to impact fiscal deficit estimate in 2017-18

The fiscal deficit estimate for the year 2017-18 is Rs 5, 46,532 crore and if the shortfall is taken into account, the deficit estimate for the year will stand increased to Rs 5, 64, 312 crore, the agency added.ETTelecom  |  June 20, 2017, 18:21 IST

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NEW DELHI: The government’s fiscal deficit estimate for 2017-18 is set to rise to 3.35% from present 3.24% of the GDP, impacted by the shortfall in non-tax revenue target by Rs 17,780 crore from telecom services, ratings agency Care Ratings said Tuesday.

Given the severe pressure on account of intense competition, fall in sales and profits, increase in debt and hugely priced spectrum acquisition, the agency has put the focus on the decision that of the inter-ministerial group – looking into the financial stress of the telecom sector – which it said will be of ‘utmost importance.’

“If the telecom industry falls short of the non-tax revenue target by Rs.17, 780 crore, then the fiscal deficit estimate for India for the year 2017-18 will stand increased to 3.35% from the estimate of 3.24%,” the agency said in a note to clients.

The fiscal deficit estimate for the year 2017-18 is Rs 5, 46,532 crore and if the shortfall is taken into account, the deficit estimate for the year will stand increased to Rs 5, 64, 312 crore, the agency added.

The agency’s views come a day after ET reported that the telecom department (DoT) asked the finance ministry to cut the non-tax revenue target from telecom services by over 37% to Rs 29, 524 crore for the current financial year, on account of financial stress in the sector caused by intense competition and debts that the banking sector considers to be around Rs 7.29 lakh crore.

“Witnessing the current trend of falling revenues that impacted the collections of license fee and spectrum usage charges, the telecom ministry is of the view that this trend will continue in the near term as well,” Care Ratings said in the note.

The department expects license fee estimates for this fiscal to plunge by nearly half to Rs 9,255 crore and spectrum usage charge (SUC) to be lower by more than 35% to Rs 17,056 crore. It also expects zero revenue from spectrum sale even if there is an auction this fiscal, as service providers may not bid for airwaves given their highly leveraged balance sheets, member finance at DoT said in a letter to the department of economic affairs dated June 1.

Gross revenue of the sector fell by Rs 26,000 crore, or 11% on year, in the last fiscal ended March 31 to Rs 2.1 lakh crore. “In view of the severe financial stress in the sector and rapidly declining revenues of all major telecom service providers, revenue targets for DoT for budget estimates 2017-18 will actually require a downward revision,” Anuradha Mitra said in the letter.

As per the current norms, the telecom companies pay 8% of the adjusted gross revenues as license fee and 3-6% of the adjusted gross revenues as spectrum usage charges. However, of late the industry has been asking the government to reduce these charges as the industry is facing severe competition and is under financial pressure.

Care Ratings pointed to the tariff war started by Reliance Jio giving free voice and data offers, which lead to revenue decline of 1.1% in December 2016 quarter and further decline of 10.2% in the March 2017 quarter.

“It was not just the revenues but also the profit margins that were hit on a y-o-y basis in the December 2016 quarter and the March 2017 quarter due to predatory pricing. The operating margin contracted in each of these quarters and the net margin also saw deterioration during these quarters,” the agency said.

The quarterly operating margin dropped to 27.8% in the March 2017 quarter, 0.6 percentage points on-quarter, while net margin dropped to -64.5% from 0.3%, in the same period. The average sales growth rate and net profit margin of the industry remained weak in 2016-17 due to ‘new entrant that forced the incumbent telecom companies to cut their rates for data and other services,’ Care Ratings added.

The telecom operators as well as banks met the IMG over last week to assess stress in the telecom industry and are seeking support from the government for its betterment. Carriers have asked for government support by cutting licence fees, SUC, scrapping the Universal Service Obligation Fund (USOF) and deferring payments for spectrum over 20 years, among others.

Some banks have already raised concerns of loan defaults while the industry itself has been pushed into consolidation mode. Vodafone India and Idea Cellular are merging as are Reliance Communications, MTS and Aircel to better fight

Traditionally, the telecom industry hadn't been great fodder

Traditionally, the telecom industry hadn't been great fodder for water cooler conversations. It has long been thought of as a boring, dividend-paying sector.

About the Author

Bryan Borzykowski is a Toronto-based business and investments writer. He’s contributed to the New York Times, CNBC, BBC Capital, CNNMoney and several other publications. Bryan’s also written three personal finance books and appears regularly on CTV News.

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That's changing. Over the last few years, the industry has been undergoing a transformation, with telecom companies foraying into content distribution, upstart wireless firms grabbing market share, increasing digital data usage, and more. "There are more headlines about telecom today than there were three years ago," says Alex Zhao, an equity analyst with Morningstar. It's certainly a more exciting--and a more uncertain--sector than it has been for a while. And uncertainty around the sector's prospects have driven down the S&P 500 Telecommunications Services subindex 6.7% since January. Many of the more traditional players in the sector have seen declines: AT&T has fallen 3.5% year-to-date, while Verizon is down nearly 10% since the beginning of the year as of this writing. Other parts of the telecom market have climbed, though. Cable company Charter Communications, for instance, is up 13% year to date. That divergence in returns among companies is emblematic of the difference between today's telecom sector and the telecom sector of old. What's Happened with Wireless?
When most investors think of telecom, they likely think of the big-name wireless companies, such as AT&T (T), Verizon Communications (VZ), Sprint (S), and  T-Mobile US (TMUS). There's plenty of change afoot here. Years ago, AT&T and Verizon dominated the sector, and while they're still the largest players, their once-large moats have diminished as T-Mobile and Sprint have started taking market share. (Morningstar currently assigns a narrow moat rating to the former two companies and a no moat rating to the latter two.) That has impacted their pricing power, says Zhao. T-Mobile, for example, has introduced an unlimited data package, something the bigger carriers haven't wanted, but are now forced to do. It's also unclear how the content play that some wireless firms have been ­engaging in will work out. If AT&T's purchase of Time Warner (TWX) goes through, it will own a lot of high-quality programming, such as HBO's lineup, which could allow it to generate advertising revenues and reduce the price it pays to show content on its various platforms. It may also give subscribers content-specific benefits, similar to how AT&T provides customers free data streaming for DirectTV Now. (AT&T purchased the satellite business in 2014.) However, Zhao doesn't think the bundling model will give these companies a sustainable edge, because competitors can also start offering content for free. For instance, T-Mobile gives customers who switch from AT&T a year's free credit for a DirectTV Now subscription. The cellphone market is also fairly saturated. According to research site Statista, the number of U.S. wireless subscribers grew by just 5.4% year-over-year in the fourth quarter of 2016. Increasing competition, weaker pricing and slow growth doesn't say screaming buy, at least not in the near term, says Paul Greene, manager of the Bronze-rated T. Rowe Price Media & Telecommunications (PRMTX). "The competitive environment in the U.S. wireless industry has gotten worse for the large incumbents," he says, though he does note that he has a sizable portion in T-Mobile, which is growing faster than the others. Saying all that, buy and hold dividend investors may still be drawn to these companies, says Greene. They offer good payouts--AT&T has a trailing 12-month yield of 4.8%, while Verizon is yielding 4.85%. Like other dividend payers, these stocks may underperform in a rising rate environment--but the dividend is still attractive nonetheless. Better Prospects in Cable and Towers
For investors who want more growth--and perhaps more upside--managers agree that there are two areas to look at within telecom: broadband cable and cellphone towers. The former, which includes companies such as Charter Communications and Comcast (CMCSA), has been taking market share from traditional wireline operators that transmit cable over a copper line. Broadband cable is delivered over the internet and is a much faster delivery system than wireline, says Scott Walker, an analyst with MFS Investment Management, who contributes telecom ideas to the Silver-rated MFS Utilities (MMUFX). "It's really winning that race consistently," he says. Broadband is also Netflix-proof. Since the internet is also delivered over broadband, even if someone cuts the cable cord, they'll need a fast and reliable connection to stream movies. "If you ditch your cable bundle, you still need some way to consume Netflix (NFLX)," says Walker. "So your faster speed alternative will be (broadband) and that reinforces the bet in the long-run." Both Walker and Greene are also fans of tower companies, which are physical towers that transmit wireless signals to cellphones. They charge carriers a fee for use of their towers, and that fee can increase as consumers consume more data. Companies in this subsector, such as SBA Communications (SBAC) and American Tower (AMT), typically raise prices by inflation or 3%, whichever is higher, says Walker. As people use more data--Americans are expected to increase their data consumption by 535% between now and 2021, according to a 2016 Ericsson Mobility report--­tower companies could start seeing double-digit revenue growth, says Walker. Greene thinks the sector will see strong internal rates of return, too. "We can see compound returns grow at double digit rates with a lot of visibility and without much variation," he says. Pick Your Spots--and Mind the Uncertainty
Currently, the telecom sector is just slightly undervalued according to Morningstar, trading at 0.96 fair valuation ratio. A few names are trading in 4-star range, suggesting they're undervalued by Morningstar's metrics: CenturyLink (CTL), Frontier Communications (FTR), and Windstream Holdings (WIN). However, investors in this sector should pay close attention to uncertainty ratings, which vary by company. Despite the pressure on the traditional telecoms, AT&T and Verizon both earn medium uncertainty ratings, because they're still large companies that generate plenty of cash, says Zhao. However, CenturyLink, Frontier Communications, and Windstream Holdings all carry high or very high uncertainty ratings due, in part, to increasing competition in the cable sector. While several Morningstar Medalist funds hold telecom stocks, Greene's T. Rowe Price fund is the only telecommunications fund that earns a medalist rating. Some other telecom-focused mutual funds and ETFs include Fidelity Select Telecommunications (FSTCX), iShares US Telecommunications (IYZ), S&P Telecom ETF (XTL), and Vanguard Telecommunication Services ETF (VOX). Bryan Borzykowski is a freelance columnist for Morningstar.com. The views expressed in this article do not necessarily reflect the views of Morningstar.com.

Landline charges for 2m customers to be cut as telecoms watchdog steps in

Ofcom has slammed telecom providers for offering landline-only customers poor value for money, as it unveiled plans to force BT, the dominant provider, to cut bills by at least £5 a month, benefiting about 2.3 million people.
The regulator has reviewed how the market is working for customers who buy only a landline service from a provider – either because they do not want broadband or pay TV, or because other companies provide these services.
Ofcom said the customers, who tend to be elderly people who have been with BT for decades, were getting “poor value for money”.
The watchdog aims to force BT to cut its standalone line rental by £5 to £7 a month which means customers with only a landline, who currently pay £18.99 a month, would pay no more than £13.99 – a reduction of at least 26%. The price cut would not apply to landline services sold by BT as part of a bundle of services including broadband.
BT accounts for nearly 80% of the landline-only market of 2.9 million people. At the start of the review in December, Ofcom said BT and Virgin Media had the highest line-rental charges, followed by TalkTalk and Sky. At the time, Virgin Media launched a “Talk Protected” plan which freezes line rental for elderly and disabled customers at £17.99.
Ofcom expects other providers who benchmark prices against BT to follow suit and cut landline rental charges. The regulator’s investigation closes in May. It will announce a final decision towards the end of the year.
Consumer groups and the Labour party welcomed Ofcom’s move. Tom Watson, shadow secretary of state for culture, media and sport, said: “This landline rip-off can’t go on any longer. It’s a scandal that service providers have increased landline prices year on year despite benefiting from significant decreases in wholesale costs.
“Landlines are important to households across the country, and the elderly and vulnerable in particular. We need to see a fairer deal for consumers and the government must act to put safeguards in place to prevent future increases above inflation.”
Citizens Advice called for similar action in other markets such as energy. Its chief executive, Gillian Guy, said: “Loyal customers often pay much more for their essential bills. People who stay with the same phone, broadband, gas and electricity supplier are getting a raw deal – as firms know they are less likely to shop around to get a better price.”