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.
