Analysts give four reasons why valuations will nosedive. First, the cellular service industry will be delicensed as a result of the unified licensing regime. So the premium paid by companies will disappear gradually.
Second, the capital expenditure to build a network has fallen dramatically, so no one will be willing to pay for the high cost of the network today. For instance, the capital expenditure per subscriber has fallen from $150 to $175 two years ago to less than $100.
The overall capital cost per subscriber is also on a crash course. For example, if for one lakh subscribers, a company spent $ 200 per subscriber as capex two years ago, he could simply double his network by another one lakh today, but at a lower capex of $100. So, effectively the overall capex per subscriber would be down to $150.
Third, with pre-paid cards forming a good chunk of revenue(it constitutes 80 per cent of the subscriber base), smaller companies face the threat of losing customers to the big boys. That will again impact valuations adversely.
