A Raja, who took over as communications and IT minister on Monday for the second time, reiterated that he had brought about more healthy competition in the telecom sector by allowing new players to enter. Raja exuded confidence that once more new players start operations, tariffs would further come down and the telecom penetration would deepen. But more than a year has passed by and not a single new operator has begun services. While international telecom players like Etisalat and Telenor have picked up substantial stakes in Swan Telecom and Unitech Wireless respectively, these two may end up better off than others. But, the odds are still heavily stacked against them.
New licencees like Datacom and Loop Telecom are still to find a strong foreign partner who can chip by way of expertise and funds. Rolling out the services in these tough times without a foreign partner would be a difficult task to accomplish. Although India has been adding over 10 million subscribers on a monthly basis, the market would be saturated and the net subscriber addition will shrink within the next two-three years. The only profitable proposition for them would be the upcoming 3G and Wimax auctions.
Now that the urban markets are almost saturated, the operators are reaping the opportunity that lies in rural areas. The cost of rolling out services and infrastructure in these rural areas would be very high. Also, low revenue per minute would result in low average revenue per user. So, the foreign investors, now on will be a bit hesitant to invest in India, as the business proposition would not be as profitable.
Also, the M&A trend has changed from being enterprise focused?like in the case of Reliance Communications acquiring Yipes Communication through FLAG Telecom to become an international player in data communication?to consumer focused now. Meanwhile, with the Bharti-MTN talks beginning once again, all eyes are focused on it.But even if it materialises, it can in no manner be used as a yardstick to measure the prospects of M&A in the Indian telecom space, because these two companies have economies of scale which the new operators do not have.
<>inikita.upadhyay@expressindia.com