Nascent Indian mobile operator Reliance Jio Infocomm will reportedly seek to acquire smaller players to gain sufficient scale to compete with the market leaders. Many believe Jio’s entry will spur much-needed consolidation.
Nascent Indian mobile operator Reliance Jio Infocomm will reportedly seek to acquire smaller players to gain sufficient scale to compete with the market leaders.
The Economic Times cited a senior executive at Jio, which is gearing up for its commercial launch, as saying the company is “on the prowl for subscribers” and sees itself as “a predator” surrounded by “many prey”.
The executive said he believes there is space for just four operators long-term, indicating that the three largest players – Bharti Airtel, Vodafone and Idea Cellular – along with itself would be the survivors.
Jio, owned by billionaire Mukesh Ambani’s (pictured) Reliance Industries, has declined comment. The company says it has spent some Rs340bn (US$5bn) on airwaves in preparation for its launch, and deployed 250,000km of fibre optic network
General consensus that consolidation is inevitable
The need for consolidation in India’s crowded mobile market is a view universally shared by dealmakers, executives and analysts.
Sunil Mittal, chairman of Airtel parent Bharti Enterprises, was cited earlier this week saying he expects Jio’s entry to the market to trigger a wave of consolidation which will shrink the market to five or six players: the top three, Jio, state-run BSNL/MTNL and potentially another merged entity.
Sunil Sood, CEO of Vodafone India, was also cited this week saying that the need for 4G investment would lead to natural consolidation.
Fitch Ratings concurs, adding that unprofitable smaller operators such as Videocon, Aircel and Tata are likely to exit.
The Indian government’s decision in September to approve spectrum trading is also expected to trigger consolidation.
In early November, Reliance Communications (RCom), part of Mukesh Ambani’s brother and sometimes rival Anil’s Reliance Group, agreed to buy smaller rival Sistema Shyam Teleservices (MTS India) from Russian parent Sistema for an undisclosed sum.
Idea has since agreed to buy 4G spectrum from Videocon for Rs33.1bn (US$499m). Norway’s Telenor, in the meantime, is reportedly close to sealing a deal to buy Rs35bn (US$524m) of airwaves from Videocon.
