‘Virtual Consolidation underway in Indian telecoms market’

NEW DELHI: India’s largest private telcos – Bharti Airtel and Reliance Communications - claim that "virtual’ consolidation is underway in the country’s crowded telecoms market, with new entrants scaling down their rollout plans and shying away from reducing tariffs further.

"Although 14-15 telcos continue to exist ‘consolidation has already begun in the virtual sense’, says Mahesh Prasad, president for wireless services at Reliance Communications (RCOM).

"In most circles, only about 6 operators continue to sustain market momentum, The intensity of competition has come down," says Mr Prasad.

Some of the new entrants in the telecoms market have not rolled out networks in many geographies despite being granted spectrum. Many new entrants did not bid for 3G and broadband spectrum. All this are tell-tale signs that consolidation has started in the minds of companies, says Sanjay Kapoor, chief executive of the country’s largest telco by both customers and revenues Bharti Airtel.

Consolidation has also started in the minds of customers," says Kapoor. "Even in this crowded market, six operators now account for almost the entire revenue market share, indicating that customers have learnt to recognise bigger, stronger and better brands," he says, adding that this along with the increase in minutes of usage for larger mobile companies is proof that only certain players are present in the minds of consumers.

Bharti’s average monthly minutes per customer has jumped 3% this quarter to 480 minutes, compared with the figure for the previous three months. Idea Cellular and Vodafone Essar have reported a 13% and 10% growth, respectively in minutes of usage during the period.

Japan’s NTT DoCoMo Inc, Norway’s Telenor ASA and Russia’s Sistema set off a savage tariff war last year when they entered the Indian market. This resulted in a fall in profits and revenues of all operators. But the rate of growth posted by these companies slowed substantially in the last quarter. Uninor, STel, Loop, Etisalat DB, Videocon, and Sistema together added less than 12% of 18 million customer additions in June, according to the data released by Trai.

This is in sharp contrast to last year’s numbers when Uninor added a million users within 30 days of launch. STel managed to clock one million subscribers in 90 days from three small circles. While Videocon added 1.39 million users in May, it could add only a third of that in June. The new entrants together account for less than 3% of India’s 600 million mobile users.

KPMG’s telecom Head Romal Shetty said new entrants had failed to come up with innovative offerings to sustain the initial blitz that accompanied their launch.

"The top six players have an unique advantage as they have a larger and longer brand recall. The new entrants did bet heavily on mobile number portability enabling them to get customers, but this facility has been delayed," adds Mr Shetty.

Even Uninor, the best performer amongst the new entrants, has been struggling to make an dent in the market, while also fighting an uphill battle to get second-generation spectrum, the airwaves on which all mobile services are currently offered. Recently, the company announced the resignation of Stein-Erik Vellan as India MD amidst reports that the parent company was not happy with its performance in India. Uninor has also brought in its head for the Asian region, Sigve Brekke to add momentum to its Indian operations.

The rollout of the new companies has been slower than expected. All new entrants – with the exception of Sistema - are under probe by both the Central Vigilance Commission as well as the Prime Minister’s office for delaying the rollout of their operations. While it has been close to three years since these firms bagged their license, Etisalat DB is yet to launch commercial services, Loop Mobile has started services only in Mumbai while Videocon has launched mobile services in only in five of the 22 circles. Even Uninor and S Tel, the other new entrants, have failed to meet all their rollout obligations.