Tulsi Prasad, an Indian slum dweller, uses a mobile phone in the eastern Indian city of Kolkata, August 23, 2005 (Reuters)
Mumbai: Executives atop India’s mobile phone industry foresee a consolidation that could knock Bharti Airtel Ltd. out of first place in the $26bn market. The catalyst: free calls and industry debt that has ratcheted up to more than double revenue.
Billionaire Mukesh Ambani escalated a price war in September, vowing to reorder the market and luring tens of millions of new subscribers with Reliance Jio Infocomm Ltd.’s free services. Bharti Airtel cited “predatory pricing” when it reported a worse-than-expected 55 percent drop in quarterly profit on January 24.
That competitive pressure is drawing attention to possible deals such as an alliance between the country’s Number 2 provider Vodafone India and its third largest, Idea Cellular Ltd., according to people familiar with the matter. Such a combination would overtake Bharti Airtel in number of subscribers.
Recurring revenue for all operators in the country will probably rise to about 2.3tn rupees ($34bn) by 2020, from about 1.8tn rupees in 2015, industry group GSMA estimates.
Reliance Jio’s entry may be the final straw for carriers going it alone in the world’s second-largest mobile-phone market. Ambani amassed 72 million customers in four months by offering free services until April. Now, he plans to invest $4.4bn more, adding to the $25bn he’s already spent to take on Bharti Airtel, Vodafone and Idea.
Telenor ASA’s India unit and Tata Teleservices Ltd. are among the smallest carriers facing competition. In all, the country has 11 wireless carriers in an industry that will need to invest heavily to build 5G services, expected to be available by 2020.
Prior to Jio’s entry, Airtel, Vodafone and Idea were able to increase revenue and profit, even as they borrowed heavily to pay for spectrum and infrastructure. One of the Possible combinations might be Vodafone and Idea,which have been in talks to consolidate, according to people familiar with the matter. A merger would create a carrier with 387 million subscribers, a 36 percent market share and pan-India 4G spectrum.
Another possibility is Telenor. In a January 19 interview, Billionaire Sunil Bharti Mittal, who controls Bharti Airtel, said Airtel was in talks to buy Telenor’s India unit. Telenor is one of the market’s least indebted carriers and With a market share of about 4.9 percent, Telenor doesn’t have a pan-India presence.
Tata group, India’s largest conglomerate, was seeking a buyer for its loss-making telecom business as recently as late last year according to people familiar with the matter.
The company is currently enmeshed in a years-long legal dispute with NTT Docomo Inc. over the value of a stake the Japanese wireless carrier owned in the Indian venture. A settlement of the suit may make it easier for Tata to spin off the unit.
There is a possibility of an agreement bewteen Aircel, Reliance Communications and Sistema. In September, billionaire Anil Ambani said his telecommunications company Reliance Communications Ltd. had achieved a “virtual merger” with the operator started by his older brother Mukesh. Investments to roll out fourth-generation services across India will be funded by Jio, the younger Ambani said.
A merger of state-run carriers Bharat Sanchar Nigam Ltd (BSNL). and Mahanagar Telephone Nigam Ltd. (MTNL), has been mooted by the government, but has yet to materialize. 3bn rupees in the year ended March 2016, it said in its annual report posted on its website.
