Telecom consolidation enters final phase
NEWDELHI: Reliance Communications Ltd’s planned sale of its wireless business assets by the end of March would be the latest instance of the upheaval that has swept through the telecom industry since the entry of Reliance Jio Infocomm Ltd.
Once the sale is completed, Aircel Ltd will be the sole small operator that is outside government control, indicating that the consolidation in the industry has entered the final phase.
The entry of Jio in September 2016triggeredthelong-heralded consolidation in the sector and ushered in a data revolution. The first outcome was the collateral damage from the latter, a well-thought-through strategy by the Mukesh Ambani-controlled Reliance Jio to destabilise the incumbents that was centred around a tariff war initially caused by free services and later by ultra cheap offers.
Anil Ambani, chairman of the ADAG Group that controls RCom, on Tuesday indicated that the group’s inability to make regular investments hastened the end of RCom’s wireless business.
“The writing was on the wall. You really need a pipeline into the RBI’s printing press, if you want to be in the wireless business because it is a guzzler of currency every minute, every hour and every single day,” Ambani said. “This is a crisis of the wireless telecom sector. It has engulfed many, many people. If it is the mighty house of the Tatas, who had to gift their business, then there is little to be said about other competitive groups.”
Among the most notable deal making since Jio started commercial services is the merger between the country’s secondlargest provider Vodafone India Ltd and third ranked Idea Cellular Ltd, a combination that is set to end Bharti Airtel’s more than two-decade-long reign as India’s No. 1 once the merger is completed. The merger will create the world’s second largest and India’s largest telco, surpassing Airtel. It will have 400 million customers, with 35% customer and 42% revenue market share. It will have a revenue of ₹81,600 crore and an operating profit of ₹24,400 crore. The merger is expected to be completed in 2018.
To counter Jio and the mammoth that Vodafone-Idea could be, Airtel on its part acquired assets of Telenor India, Tikona Digital, and consumer and mobile businesses of the Tata group.
Telco mergers do allow for meaningful synergies on costs.
But, that would mean little for consumers.
“The end of consolidation is looking bad for consumers with only a few companies left. Today consumers are happy as they are getting cheap tariffs, but this party will end soon,” said an industry executive requesting anonymity.