What is the issue?
- Consolidation in India’s overcrowded telecommunications industry was perhaps inevitable.
- It all started in November, 2015, when Reliance Communications agreed to acquire Sistema’s Indian wireless business.
- Since then, mergers have gained considerable momentum with several more announcements.
- The biggest one is the proposed cashless, all-share equal merger between Vodafone India and Aditya Birla Group firm Idea Cellular.
What is the condition of private players?
- Five years ago, as many as 12 private players jostled with the two state-run telephone operators, BSNL and MTNL, as they vied for a share of the country’s 893.8 million wireless subscribers.
- While the market had expanded to almost 1.13 billion subscribers as of December 2016, the number of non-state mobile services providers had shrunk to 10.
- With seven of the nine either in the process of being acquired or merged, or in talks to negotiate a deal, the industry is now finally poised to coalesce into four large private sector entities.
What are the concerns involved?
- Still, size alone may not guarantee good health, especially when considering the ongoing fierce battle for market share.
- The price war, while good for the consumers, is bound to extract a heavy price on the service providers’ financials.
- That in turn will further erode the revenue the Centre earns from licence fees and spectrum usage charges.
- All such mergers and partnerships will cause big redundancies across the chain, from employees, vendors, trade partners, bankers etc.,
- Short-term anxieties needs to be managed to see that the partnership is properly consummated.
- Already there is speculation on who will head the Vodafone-Idea combine.
- After a certain period, what will matter is how two different corporate cultures are reconciled, and whether a new one is allowed to flourish or just wither away.
Source: The Hindu & Indian Express
