The secretary of India’s Department of Telecoms has expressed his belief – and wish – that new regulations encouraging consolidation in the country’s mobile market will be introduced by the end of 2011.
DoT secretary R. Chandrashekhar said: "It is a priority for the government to remove roadblocks to consolidation, which currently exist. Every company can plan their long-term investments and their business strategy knowing that this is the direction in which the country will go.”
Competition in India’s mobile sector is rampant; with 15 operators present in the market, prices have been driven down to less than US$0.01 per minute. However, consolidation is currently impeded by M&A laws: there must be at least 4 private-owned operators present in each of the country’s 22 telecom circles, but the maximum market share allowed – for single or merged businesses – is 40%.
This restriction is compounded by other measures – operators cannot own a stake of more than 10% of another provider present in the same circle, and once they have obtained their licence they are banned from selling a stake for a three-year period. In addition to this, there is a limit to the amount of spectrum an operator can hold in each circle.
Chandrashekhar added that the amount of regulations “result[s] in fragmentation of the market, more so in terms of spectrum, and denies companies and consumers the benefits of more efficient operations.”
Mahesh Patil, co-chief investment officer at Birla Sun Life Asset Management, said: "Getting some clarity on mergers and acquisitions will be a win-win for the sector. Incumbents will be able to consolidate their position and struggling marginal players may find an exit option.”
