Birla may tap markets as India's telecom wars worsen
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.
Bad times: Birla says the telecom sector in India is undergoing a very turbulent and difficult phase.