In April last year, Bharti signed a Rs 3,500 crore spectrum trading agreement with Aircel
Bharti Airtel's acquisition of consumer mobile business of Tata Group marks an exit for the latter from the market at a time when the industry is in the midst of consolidation triggered by the entry of a new operator Reliance Jio, owned by billionaire Mukesh Ambani.
This is the second big merger deal being announced after Vodafone India, a subsidiary of UK's telecom player Vodafone and Idea Cellular decided to merge into a single entity, which will create the largest telecom player in the Indian market, uprooting current top player Bharti Airtel off its position. The merger process is underway.
Mahesh Uppal, director, ComFirst, a consultancy firm, says Tata Group's exit from mobile business has been expected for a year now.
"Airtel has got a good bargain. It will strengthen Airtel's position in the market but to what extent? Only time will tell. There is still pressure and a risk to revenues because of Reliance Jio's aggressive tactics in the market," he said.
"We are in a consolidation phase and will probably be left with 3 private players plus one PSU in the telecom industry," Uppal said.
With a subscriber base of 1.2 billion, Indian mobile market, especially consumers, has seen a complete shift in usage of a mobile phone as the entry of Reliance Jio brought in free voice calls and dirt cheap data tariffs. For telecom players, it meant a price war with declining margins and a hit on profits in an already debt-ridden industry.
Experts said consolidation is the need of the hour. Telecom industry has been witnessing intense competition since Reliance Jio came into the picture last year and consolidation was inevitable.
Consolidation in India mobile is set to accelerate which bodes well for top operators, presenting them with an opportunity to outpace the sector growth and improve share and profitability, as per a report by CLSA on telecom sector outlook.
The accelerating consolidation in the telecom industry will benefit top operators but pose some risk to tower companies given the tenancy. "The scaling down/exit of business by smaller mobile operators will place in aggregate about 20%of industry cell sites at risk," the report said.
Airtel is also in the process of acquiring operations of Telenor India. Other smaller players such as Aircel and Reliance Communications have been left to compete with the bigger ones after the merger deals get through all approvals.
Though, even Aircel and Reliance Communications were trying to merge their operations but called off their talks recently citing legal and regulatory delays. RCom has a debt of about Rs 46,000 crore and is looking at ways to reduce its high debt.
In a recent interview with DNA Money, Bharti Airtel CEO and MD Gopal Vittal had that said India is on the cusp of a big opportunity and in 3-4 years, there will be a billion smartphones. Also, in the next 12-18 months, only three private operators plus BSNL will be left as the market is in a consolidation phase.
RECENT DEALS
- In April last year, Bharti signed a Rs 3,500 crore spectrum trading agreement with Aircel
- It has acquired spectrum of Videocon under Rs 4,428 cr deal
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