South East Asia giant Singapore Telecommunications (SingTel) is urging Bharti Airtel, in which it has a 33% stake, to consolidate the Indian mobile industry.
SingTel chairman Simon Israel told the Economic Times that his company would support an…
South East Asia giant Singapore Telecommunications (SingTel) is urging Bharti Airtel, in which it has a 33% stake, to consolidate the Indian mobile industry.
SingTel chairman Simon Israel told the Economic Times that his company would support an attempt by India’s largest telco to acquire a smaller operator. He however remained evasive about whether the Singaporean company would provide some funding for the move.
The comments come a few days after the CEO of Vodafone India, Marten Pieters, described the operator as a “natural consolidator in the market”.
Pieters said Vodafone was financially strong in the country and wanted scale, but that India’s regulatory conditions were not currently suitable for acquisitions.
But according to the Economic Times, the government is expected to announce new M&A rules within the next few weeks, which could help trigger a consolidation trend in the saturated Indian market.
Just a month ago the Indian cabinet rubberstamped full foreign ownership of local telcos by removing the 74% cap on foreign direct investments (FDI).
Although foreign companies such as Sistema, Vodafone, Telenor, SingTel and Axiata will no longer need to team up with local partners, not all of them may increase their stakes in Indian telcos.
Sachin Gupta, an associate at Nomura Securities, told TelecomFinance a few weeks ago that foreign companies invested in large operators might not want to fully own those companies. He said that foreign investors need to have a view that the market conditions are actually quite favourable to justify spending any more capital in the country.
However, for mid-tier companies, Gupta added that this could be a catalyst to drive their expand-or-exit decisions as profitability has been a struggle.
Commenting on 100% FDI in telcos, Israel said that, besides encouraging consolidation, greater access to foreign funding will allow Indian companies to further invest in developing their networks.
With 12 mobile operators, the Indian mobile market is ripe for consolidation and Israel believes the country should be home to no more than six players. But regulatory uncertainties and issues in the aftermath of the 2G scam have, over the last few years, deterred investors and delayed potential deals.
