Consolidation seen in Indian mobile market: Mittal

Stiff competition in India's mobile market is abating and consolidation in the crowded market is imminent, the chairman of the country's top mobile carrier Bharti Airtel said in the company's annual report.

With more than 850 million mobile phone connections, India is the world's second-biggest telecoms services market after China and is still adding subscribers at the fastest pace.

Carriers, however, operate under wafer-thin margins in the 15-player market and a vicious price war in second half of 2009 after new licences were given out has strained their financials.

Burdened by declining margins and high costs of radio airwaves, Bharti and its smaller rivals Vodafone Essar and Idea Cellular recently increased some call prices in select zones in what was the first such increase by the established firms in at least two years.

"Hyper competition in the market with 12-13 players, many of whom happened to be new entrants, is clearly abating," Bharti's billionaire chairman Sunil Mittal said in a message to shareholders.

Not all of India's 15 carries have a national presence, but in some zones there are 12-13 operators competing to add users.

"Tariffs have stabilised ensuring return of reasonable growth for us," Mittal said. "Some semblance of sanity is being restored and consolidation is imminent."

The long-awaited market consolidation will help improve the landscape for the big carriers, but rules are not encouraging.

As India overhauls its telecoms rules after the sector was hit by a massive telecoms licensing scam, the government has said merger and acquisition rules for the sector need to be relaxed.

Mittal said "a fair amount of regulatory uncertainty still pervades the air with regard to allocation and pricing of 2G spectrum."

The telecoms regulator has recommended steep increases in the prices of second-generation (2G) mobile spectrum, which if implemented, would see companies such as Bharti paying hundreds of millions of dollars more.

As its home Indian market started showing some signs of slow down, Bharti last year acquired most of Kuwaiti firm Zain's mobile operations in Africa in a $9 billion deal to become the world's fifth-biggest mobile carrier by mobile subscribers.

India is the largest market for New Delhi-based Bharti, which operates in 19 countries across Asia and Africa. Bharti accounts for nearly a fifth of India's total mobile subscribers.

The company's African operations, which were loss making when Bharti bought them and are yet to turnaround, have been a drag on its consolidated earnings in the past several quarters.

Shares in Bharti are trading at their highest levels since October 2009 and are up about 23% this year in a weak Mumbai market and are the best performers among the components of the benchmark index.

At 0833 GMT, the shares were up 0.9% at Rs 441.10. Bharti will report earnings for its fiscal first quarter ended June on Wednesday.