Moneycontrol PRO
Upcoming Event:Join us for New HorAIzon from Oct 6-7, 2pm and be a part of exciting conversations on tech & innovation
you are here: HomeNewstelecom

Jio effect: Telecom sector consolidating into a 5-player market

Indian telecom companies are seeking mergers and acquisitions to beat tough competition.

August 04, 2017 / 12:44 PM IST
Vodafone Idea (Image: Reuters)

Vodafone Idea (Image: Reuters)


Reliance Jio had already picked up as many as 109 million subscribers by April this year.Considering that the telecom operator had been in the business for only eight months back then, this was an impressive feat.

One could argue that the rapid addition of customers would not have happened if not for Jio offering all its services free of cost.

However, that argument was put to rest when Reliance Industries Chairman Mukesh Ambani confirmed at its recently-held annual general meeting that most of Jio's subscribers are now paying subscribers.

The operator's tariffs have started a price war in the already competitive market, leading to severe losses for other domestic telecom operators. Its rapid growth has certainly come at the cost of other Indian telecom companies' market share.

Is consolidation the way to go?

Close

Almost every other player in the telecom sector barring Jio has been in talks with other players to join hands in their fight against the Mukesh Ambani-owned operator.

In February, Telecom Secretary JS Deepak said that the Indian telecom market would eventually consolidate to have only five major players.

He further said "consolidation is going to be very good for India as we are likely to get four private and one government player (BSNL-MTNL), which is ideal."

According to the Telecom Regulatory Authority of India (TRAI), there were more than 1.18 billion wireless telephone subscribers in the country in April 2017 who were being serviced by as many as 12 operators.

Key mergers and acquisitions currently in the pipeline:

Airtel and Telenor India

Airtel's acquisition of Telenor India (previously known as Uninor) received the National Company Law Tribunal's (NCLT) approval on Thursday.

With the takeover, Airtel is set to gain Telenor's spectrum in the 1800 MHz band across seven telecom circles. The takeover will also help India's largest operator boost its market share after adding all of Telenor India's 49.34 million subscribers. (as of April 2017).

Vodafone and Idea Cellular

India's second largest (Vodafone) and third largest (Idea) telecom operators are now in the process of merging to form what would become the country's largest operator. It will also be the world's second largest telecom service provider.

According to the terms of the deal, Idea's parent entity Aditya Birla Group will gradually raise its stake in the combined entity while the Vodafone Group will reduce its stake until both their shares are equal.

They are, however, battling regulatory challenges as the combined entity would exceed spectrum limits.

Reliance Communications and Aircel

In April 2017, the two companies approved a merger that would create the country's fourth-largest network by revenue and subscribers. RComm and Aircel's parent firm Maxis will own 50% stake each in the merged entity.

The two companies are now waiting for a final approval from the NCLT. The proposed merger is crucial for RComm as it will retire Rs 25,000 crore of debt from its total debt of around Rs 45,000 crore.

Other talks

Bharti Airtel has pulled the plug on mega-merger talks with the Tata Group. The merger would have seen Tata Communications, Tata Teleservices, Airtel and direct-to-home (DTH) TV services Tata Sky and Airtel DTH come together as one. Bharti Airtel would have also taken control of Tata's overseas cables.

However, the Sunil Mittal-led group decided not to go ahead with the proposal after SingTel (Singapore Telecommunications), which holds one-third stake in Airtel said that the company should focus on closing its acquisition of Telenor India and selling stake in Bharti Infratel.

According to a report in The Times of India, Tata Sons Chairman N Chandrasekaran is working in a time-bound manner to fix their ailing telecom businesses and has asked his 'deal-makers' to explore all options.

Disclosure: Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd.
first published: Aug 4, 2017 12:38 pm

stay updated

Get Daily News on your Browser
Sections
ISO 27001 - BSI Assurance Mark