Rules prohibit foreign players from applying for a license as standalone entities. So these players will need an Indian JV partner who holds at least a 24 percent stake in the venture to be eligible.
The final payment bank guidelines released by the RBI make it easier for telecom companies to apply for, and get, a license. And given the advantages of such a move, experts say firms will be lining up with applications. But CNBC-TV18's Malvika Jain and Kritika Saxena report that the journey will be far from easy, especially for foreign telecom players.
In an era of number portability, stiff competition and fairly impatient customers, the guidelines for payment banks released by the RBI come as a bit of a relief, and an opportunity for telecom companies. A payment bank license will boost the services offered by mobile operators, making the customer's decision to move on just a little bit tougher. They will also allow companies to better leverage their network, and earn fee income on remittance and payment products, card services, and third-party product distribution, to name a few. That alone could see these companies lining up for a licence.
Rajan S Mathews, director general, COAI, says: "Guidelines are a positive. Telcos will apply. There are a few glitches which we feel can be fixed."
However, the rules give domestic players like Idea and Bharti Airtel an edge over foreign players like Vodafone and Telenor.
That's because they prohibit foreign players from applying for a license as standalone entities. So these players will need an Indian JV partner who holds at least a 24 percent stake in the venture to be eligible.
Mathews adds: "FDI not being permitted will be an issue. Vodafone and Telenor are keen to apply but they are both 100% FDI owned. This will be an issue."
A restrictive FDI policy may not be the only deterrent though.
Brokerage firm Crisil points out that even domestic telecom players will not see payment banking operations add significantly to revenues. It says that even five years after launch, the contribution of payment banks to overall revenues is likely to remain at less than 1 percent. Also, while telecom operators are likely to capture around 15 percent of the domestic remittances market by then, luring deposits is a completely different ball game requiring heavy investment in building a brand and securing the trust of the depositors.
So unless a telecom player is focussed more on long-term benefits, many may hold out looking for any sweeteners that may come their way.
Idea Cellular stock price
On November 28, 2014, Idea Cellular closed at Rs 159.30, down Rs 5.5, or 3.34 percent. The 52-week high of the share was Rs 183.65 and the 52-week low was Rs 125.10.
The company's trailing 12-month (TTM) EPS was at Rs 6.13 per share as per the quarter ended September 2014. The stock's price-to-earnings (P/E) ratio was 25.99. The latest book value of the company is Rs 44.10 per share. At current value, the price-to-book value of the company is 3.61.
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