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The recent wave of consolidation will prove beneficial for the telecom sector and is an indication of the huge potential of the Indian market, said Union Telecom Minister Manoj Sinha.
Speaking to CNBC-TV18, Sinha said that Bharti Airtel's acquisition of Telenor and the merger of Vodafone and Idea Cellular will result in "harmonisation" of spectrum and better services for consumers.
He said that even after consolidation, he sees five to six players and there will be good competition and no monopoly.
As smaller players leave the market, Sinha said it was clear that telecom firms were eyeing a broad base for operations, which was another reason for consolidation.
On the Vodafone-Idea combine, he said the companies had not yet applied to the Department of Telecommunications for the merger.
With the entry of Reliance Jio and its speedy acquisition of 100 million-plus customers on the back of promotional offers, competitors such as Airtel and Vodafone have cried foul. But Sinha said the new player was entitled to give offers as others had done so in the past.
On the deteriorating health of telecom companies, Sinha expressed confidence that the sector would revive and said the government would intervene when needed.
The government recently asked its top bureaucrat to look into the problems faced by the sector, including the risk its Rs 4.4 lakh crore debt poses to the banking system.
Sinha also said there was no formal proposal for the merger of government-owned BSNL and MTNL.
Below is the verbatim transcript of the interview.
Q: My first question to you is, the telecom sector is witnessing a consolidation wave be it smaller players like Telenor being acquired by Airtel or giants such as Vodafone and Idea Cellular being merged in due course. Do you think this kind of a consolidation was inevitable?
A: I think it is more beneficial and worldwide practice is, in most of the countries two or three players are there. After consolidation I think formalisation of spectrum will take place and better services will be available for the consumers. What consolidation I can assess, at least there will be five to six players, so, there will be a good competition also. There will be no monopoly. So, I think it is a good practice.
Q: You do say that consumer is king, so, with the consolidation in the coming months, as you said about largely four to five players in the telecom space, will the consumers benefit out of this consolidation and how do you think it will change the dynamics for the sector?
A: Small players are leaving the playing field and naturally every telecom service provider needs a broad base and certainly for that only they are consolidating. Competition is very tough, a huge market is available in India and everybody is trying to grab the market and that is why this consolidation is taking place. What I feel, naturally consumer will be benefited.
Q: We are talking about consolidation, Vodafone and Idea will soon merge together, they have started their processes. In fact Kumar Mangalam Birla as well as the Vodafone Global CEO came to meet you to discuss the potential merger. Have they already submitted their application to the department of telecom (DoT) as far as seeking regulatory clearances are concerned?
A: They have meet me undoubtedly and still they have not applied for merger in DoT. They are doing their process in other departments; once they send their application we will go by the norms.
Q: The telecom sector is under great financial stress, the Reserve Bank of India (RBI) has also written to the banks asking them for a higher provisioning for the telecom sector at this point in time, does this worry you, is the DoT watching the health of the sector which is continuously eroding especially over the last six to nine months as a new telecom player has kicked up a storm in this industry. Does this really worry you or is the government watching?
A: In Q3 and Q4 naturally the balance sheet shows that there is a deterioration in the revenues of the telecom service providers (TSPs). However, as far as new player is concerned, he was entitled to give promotional offer for 90 days and he gave it. Earlier also when new players came, to increase their consumer base, they have given such type of offers.
At this stage I can say that whenever it will be needed, government will intervene. India is a huge market and the market is shifting from voice to data and hopefully 125 million people are in our country and day-by-day the use of data is increasing. I think the sector will revive.
In 2000 also this type of phenomena was seen in the sector but I think every telecom service provider is in a good health and I have already told you many times that I am not minister not of BSNL, I am minister of telecom, so, definitely I will look into the financial health of private telecom service providers also. If needed, we will intervene.
Q: You are quite optimistic as far as the recovery process goes for the telecom industry. You also did say that the DoT will intervene as and when required but the financial stress is quite stark. This has been discussed in the finance ministry level as well. Are there any sectors where it needs to touch upon, where DoT has to work upon?
A: We are vigilant and I told you, whenever needed, we will intervene but it can’t be discussed with you how we will intervene and when we will intervene.
Q: You did talk about BSNL, in fact the next big thing to watch out for will be the merger of BSNL with MTNL. It is under a thought by the PMO as well, do you think that this merger will really benefit to the loss making MTNL at this point in time and as well for BSNL as well?
A: At this stage I can’t comment on this because there is no such proposal of merger of BSNL-MTNL. There are thoughts, department of officials are working on them but one thing is sure, if it takes place then it will be a big player of telecom in government sector and it will certainly increase their customer base also.
However, one thing is there, in backward areas, in rural areas, BSNL is providing the services and being service providers, being a government PSU, BSNL, MTNL are doing quite well. After all these ups and downs, they are surviving. They have seen so many ups and downs in their history and I hope that they will survive.
Q: If at all BSNL and MTNLs operations are merged together, do you think that this state sector giant will be able to take on the private teleco’s as well given the market dynamics?
A: At present 12-13 percent share are with government.
Disclosure: Reliance Industries, which owns Reliance Jio, also owns Network18, which publishes Moneycontrol.com.
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