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| Top telcos to gain ground, upstarts to feel the pinch |
| Mansi Taneja / New Delhi Feb 03, 2012, 00:31 IST |
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Bharti Airtel and Vodafone India are set to gain more subscribers and market share after Supreme Court ordered on Thursday to cancel all 122 2G licences issued four years ago.
Experts feel the verdict could pave the way for a much-needed consolidation in the sector, which currently has about 16 players. It will also enable incumbents to increase foothold.
Gartner analyst Kamlesh Bhatia predicts a shake-out in the market that would eventually lead to a consolidation. “Generally, this happens through mergers and acquisitions or through the market regulator. In this case, the judiciary has become instrumental,” he said.
There was, anyway, a need for certain measures to put the sector back on the growth mode and the Supreme Court verdict “will provide just that”, he said.
KPMG analyst Romal Shetty said the judgment will “definitely help” incumbents such as Bharti and Vodafone. “With mobile number portability facility available, subscribers will soon start shifting to the incumbent network. The brand value of these companies will attract the subscribers,” he said. On the other hand, it will hit the new companies hard. Even so, there is a silver lining for them as well. The auction route will enable new players to retain licences, Shetty adds.
However, many experts are also of the opinion that the tariffs may increase in the future as the incumbents are fighting under intense competitive conditions owing to low tariffs.
Last year saw some price correction — about 15-20 per cent — upwards, but it might go up further in the future since the market will now be restricted to a few players.
Thursodays’ verdict has directed Trai to make fresh recommendations for the grant of licence and allocation of spectrum in the 2G band in 22 service areas by auction, as was done for allocation of spectrum in the 3G band.
The government will consider the regulator’s recommendations, and take a decision within a month, following which fresh licences will be granted.
The order will jeopardise about Rs 35,000-40,000 crore that the companies have already invested. It will, though, impact only 7.2 per cent (71 million) of the total subscriber base of 894 million in India, the second-largest wireless market by subscribers after China.
In all, eight companies have been affected -- Uninor (a joint venture between Norway’s Telenor and Unitech Group), Sistema Shyam (JV between Russia’s Sistema and Shyam Telecom), S Tel, Videocon, Idea, Tata Teleservices, Loop Mobile and Etisalat DB (JV between the UAE’s Etisalat and Swan Telecom).
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