Sept. 12: Telecom regulator’s recommendations to allow the merger of small players with industry majors may not lead to consolidation, say analysts.
"Consolidation in the Indian telecom sector, in a meaningful way, would cause us to turn more positive versus our current cautious stance. However, recent news flow points toward a potential exit of some of the smaller telcos which with their 2-3 per cent sub market share and one per cent revenue share would not change the industry structure and competitive dynamics,” said J.P. Morgan.
India current has around 14 telecom players. The top six telcos control 91 per cent of the subscriber market share and 94 per cent of the revenue market share.
The launch of the mobile services by some of the new telecom players like Japan’s NTT DoCoMoin 2009 started a tariff war in the telecom sector. This impacted the revenue of all major telecom players. However, now the new entrants have failed to gain a significant market share leading to speculation over exit of smaller players.
In markets around the world, high competition and prospects of low return have driven consolidation in the sector. In most markets globally, only three-five operators have emerged post consolidation.
However, J.P. Morgan said that the regulations are the major roadblocks in the merger and acquisition of big players.