Mobile phone con­sol­i­da­tion fore­seen in In­dia

The Star Early Edition - - BUSINESS REPORT - Sid­dharth Philip

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

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