Get more telcos in

Updated: Jan 2 2006, 05:30am hrs
The Aircel-Maxis-Reddys deal at $1.08 billion, the Vodafone-Bharti deal at $1.48 billion, the Essar Communications-Hutchison Essar deal at $1.15 billion and the Orascom-Hutchison Telecom deal at $1.3 billion are all indicative of a global buy-in of the India telecom growth story. Very big money is beginning to chase the few telecom operators in India right now. The Vodafone-Bharti deal, for instance, has been struck at $978 per subscriber, the highest in the global telecom industry in 2005 and one of the highest in a long time. The next best in 2005 was a Vodafone-Vodacom deal at $930 per subscriber.

The situation right now is in contrast to the late 90s and early 2000s, when India saw a huge exodus of global telecom players from the market. Cingular-AT&T, British Telecom, Vodafone, Bell Canada, Swisscom, Alcatel all had a presence in one or the other mobile operator, but decided to cash out. Mobile rates were still very high and though the growth rates were also very high, the base was so small that international telecom players never thought the market would explode the way it has in the past three-four years.

The current interest in the Indian telecom mart is also because China, the worlds largest and fastest-growing telecom market, does not allow foreign players to own a majority in domestic telecom services, while India has allowed up to 74% FDI. The current valuations in the market indicate a growing demand for telecom stakes against a choking supply. A clear indicator of an overheating market in the near term. Its time for intervention to ease the situation. Though this may be the best time for shareholders and promoters who have invested in the hope of cashing out at the most opportune moment, it is also the time when valuations could become unrealistic. Before the market overheats and valuations go crazy, its probably time now to invite more players in domestic telecom services. India may officially announce inviting two additional telecom service providers in every circle. It would not only satiate demand for investments, but also cool the valuations.