A BROADER SPECTRUM
Ongoing mergers, acquisitions and the entrance of a new service provider have certainly disrupted the telecom industry recently, but exciting times lie ahead. For many operators, the mergers and acquisitions (M&As) were largely intended to curb declining revenues amid rising costs. Operators also viewed M&As as a way to reduce debt, cut losses and become profitable.
For the industry to grow in the long run, mobile operators need to position their businesses to capitalise on the underpenetrated rural markets. They also need to push the adoption of data (mobile internet) in both urban and rural markets. If they can execute on these fronts, the resultant growth in volume should counter the industry’s falling average revenue per user (ARPU).
THE BALANCE BETWEEN CONSOLIDATION AND GROWTH
In an overly competitive market over the past few years, most telecom operators have opted to consolidate to ensure profitability. Today, there are six players in the market—down from 13 in 2013. The 13 players comprised 11 independent brands, two brands operated by the government (BSNL and MTNL), and two brands (Connect and Videocon) operated by the same company. Six brands that remain today are Airtel, Idea, Vodafone, Jio, BSNL and MTNL. Tata Docomo, Uninor, Videocon and Loop are already either acquired or in the process of getting acquired by Airtel. Once Idea and Vodafone merge, the number will drop to just five players.
Despite the significant amount of M&A activity in the telecom in dustry, the bulk started only in the latter half of 2016. Notably, industry revenues peaked in June 2016. Then, they started to decline after September 2016 when a new operator offering free SIM cards entered the market. Those were unsettling times for the operators, but the tide started to turn around after the “free SIM regime” period ended in June 2017. Despite the uptick, the industry’s revenue never recovered to the erstwhile June 2016 numbers, and operators continue functioning at much lower revenues today, which has prompted some players to shut shop or get acquired.
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