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Consolidation could take off in India as regulator considers relaxing acquisition laws

India could soon see the number of operators in its market drop significantly, with recent reports suggesting that the country’s Department of Telecoms may relax merger and acquisition rules “so significantly that it will leave only around six operators in any service areas.” In such a scenario, around 10MHz of spectrum would be available to each operator.

The suggested revisions could be addressed in an assessment of India’s telecom policies due to take place in April. Minister of Telecom Kapil Sibal is reportedly investigating ways of safeguarding smaller operators’ investments if they are acquired by larger firms; however, this could potentially drive up the prices for acquisitions, making them a less attractive option.

India has a significant amount of startup operators that hold 2G spectrum but have failed to make an impact on the market – meaning that this spectrum, while not necessarily idle, could be further capitalised upon. Larger operators are keen to acquire more spectrum, and it is likely this demand that is driving support for consolidation.

Once the regulations have been relaxed, mergers are likely to take place between operators that already have a presence in India; many observers believe that the country’s high profile 2G licensing scandal has deterred foreign firms from investing in the country. The ongoing scandal was caused by local operators which attracted foreign investment by purchasing spectrum at a knockdown price. However, foreign-owned firms that are already present in India, including NTT Docomo and Vodafone Group, could shift their focus towards consolidation.

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