NEW DELHI: India's telecom sector could continue to do well without participating in the consolidation trend, according to a leading sector expert, as the country's diverse market and consumer dynamics may not favour only three or four players.
"India clearly has substantial margin, in terms of competition. I don't think it is inevitable to proceed towards consolidation. Living in a comfortable duopoly is what many companies prefer, but all the evidence suggests is that while it's good for the companies, it is generally bad for consumers," Martin Cave, a telecom expert and deputy chairman of UK's Competition Commission, told ET during his recent India visit.
Higher number of operators would ensure adequate competition, which in turn will benefit consumers, said Cave, who has worked on spectrum strategy for markets including the UK, Canada and Australia. "There is a risk that if you reduce the number of operators to three or two, they may stop competing as hard as they should and that's going to have an adverse affect on customers."
India's telecom sector has more than 10 national and regional players, a sharp contrast to the developed markets of the US and Europe where only two or three large carriers operate. The government recently announced new norms where companies can merge as long as their consolidated customer and revenue market share remains under 50% of the market.
A company acquiring another will have to pay the market price for the allocated airwaves held by the target company. Analysts feel that the M&A norms will not benefit the industry, as new entrants may "struggle with limited exit options", while the cap on customers and revenue will deter the top three players from combining synergies.
A company acquiring another will have to pay the market price for the allocated airwaves held by the target company. Analysts feel that the M&A norms will not benefit the industry, as new entrants may "struggle with limited exit options", while the cap on customers and revenue will deter the top three players from combining synergies.
Telecom operators have been seeking clarity on the consolidation norms, which in turn could ease hyper-competition—a key reason why Indian customers enjoy the lowest voice and data tariffs in the world.