Mobile phone consolidation foreseen in India
EXECUTIVES atop India’s mobile phone industry foresee a consolidation that could knock Bharti Airtel out of first place in the $26 billion (R349bn) market. The catalyst: free calls and industry debt that has ratcheted up to more than double revenue.
Billionaire Mukesh Ambani escalated a price war in September, vowing to reorder the market and luring tens of millions of new subscribers with Reliance Jio Infocomm’s free services. Bharti Airtel cited “predatory pricing” when it reported a worse-than-expected 55 percent drop in quarterly profit on January 24.
That competitive pressure is drawing attention to possible deals such as an alliance between the country’s No 2 provider Vodafone India and its third largest, Idea Cellular, according to people familiar with the matter. Such a combination would overtake Bharti Airtel in number of subscribers.
Recurring revenue for all operators in the country will probably rise to about 2.3 trillion rupees (452.7bn) by 2020, from about 1.8trln rupees in 2015, industry group GSMA estimates.
Reliance Jio’s entry may be the final straw for carriers going it alone in the world’s second-largest mobile phone market. Ambani amassed 72 million customers in four months by offering free services until April. Now, he plans to invest $4.4 billion (R59.10bn) more, adding to the $25bn he’s already spent to take on Bharti Airtel, Vodafone and Idea.
“One effect of Jio has been that the small operators are gone,” Billionaire Sunil Bharti Mittal, who controls Bharti Airtel, said at the World Economic Forum in Davos. “I support consolidation in the industry. Wherever we have seen two, three operators with large markets, they have been profitable, they have been able to make large investments.”
Bharti’s shares rose 2.3 percent in Mumbai, and changed hands at 317.80 rupees during the day. Idea and Reliance Communications gained about 1 percent each. – Bloomberg