Birla may tap mar­kets as In­dia's tele­com wars worsen

The Star Malaysia - StarBiz - - Digital Trend -

MUM­BAI: Bil­lion­aire Ku­mar Man­galam Birla, whose Idea Cel­lu­lar Ltd is poised to be­come In­dia’s top car­rier, sees only a hand­ful of busi­nesses sur­viv­ing a price war roil­ing the world’s sec­ond largest tele­com mar­ket.

The chair­man of the Aditya Birla Group also won’t haz­ard a guess on when the in­dus­try shakeout will end in a coun­try where calls al­ready cost less than two cents a minute – and are some­times of­fered free.

“The tele­com sec­tor is un­der­go­ing a very tur­bu­lent and dif­fi­cult phase,” Birla said in an in­ter­view this week. “Prob­a­bly the fittest three will sur­vive.”

In­dia’s mo­bile op­er­a­tors have seen rev­enue plum­met and debt soar af­ter last year’s launch of Re­liance Jio In­fo­comm Ltd, a wire­less car­rier owned by Mukesh Am­bani, the coun­try’s rich­est man. That trig­gered a bruis­ing price war for mo­bile ser­vices. Jio started of­fer­ing free calls and many oth­ers in the in­dus­try fol­lowed.

Idea Cel­lu­lar is set to be­come the big­gest player by sub­scribers af­ter it closes its merger with the lo­cal unit of Voda­fone Group Plc, but it may still have to tap fi­nan­cial mar­kets to fund its sub­stan­tial cap­i­tal re­quire­ments, ac­cord­ing to Birla.

Banks are grow­ing more cau­tious in lend­ing to the be­lea­guered in­dus­try as tele­com profits fiz­zle out.

With play­ers fall­ing “like nine pins,” Birla pre­dicts that “the tar­iffs should sta­bilise at some point.”

It’s still hard to say when prices will stop fall­ing, and Idea won’t rule out share sales or bond is­sues to raise funds, he added.

Birla, 50, now faces the task of re­viv­ing prof­itabil­ity at Idea Cel­lu­lar, which has re­ported three con­sec­u­tive quar­ters of losses. Tele­com ac­counts for about 13% of the over­all rev­enue of the Birla group, which also in­cludes min­ing, ce­ment and fi­nan­cial ser­vices. The Bloomberg Bil­lion­aires In­dex puts Birla’s net worth at US$8.2bil.

A wave of other con­sol­i­da­tion is re­shap­ing the in­dus­try.

Bharti Air­tel agreed to buy the strug­gling lo­cal unit of Te­lenor ASA in Fe­bru­ary, while Re­liance Com­mu­ni­ca­tions Ltd said in 2015 that it would buy AFK Sis­tema’s lo­cal unit.

Smaller play­ers in­clud­ing Re­liance Com­mu­ni­ca­tions and Tata Te­le­ser­vices Ltd are be­ing forced to at­tempt to re­struc­ture debt and sell as­sets.

Loss-mak­ing Tata Te­le­ser­vices is said to be pre­par­ing to shut a large part of its tele­com busi­ness, ac­cord­ing to a Busi­ness Stan­dard re­port that cited peo­ple it didn’t iden­tify.

— AP

Bad times: Birla says the tele­com sec­tor in In­dia is un­der­go­ing a very tur­bu­lent and dif­fi­cult phase.

Newspapers in English

Newspapers from Malaysia

© PressReader. All rights reserved.