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Telecom Operators to Lose Money in India in Coming Years – Analyst
Source: totaltele.com
Source Date: Tuesday, June 29, 2010
Focus: Electronic and Mobile Government, ICT for MDGs, Thematic Website, Knowledge Management in Government, Citizen Engagement
Country: India
Created: Jul 05, 2010

Consolidation unlikely to happen in India in next few years due to M&A restrictions, but competition will continue to be fierce.

Intense competition in the Indian telecoms market is set to continue in the immediate future, and with operators for the most part prevented from taking part in M&A activity, hefty financial losses will follow, according to analyst firm Ovum.

"[Competition in India] is unsustainable," said Angel Dobardziev, emerging markets practice leader at Ovum.

"Until there is a way out... lots of people are destined to lose lots of money," he told Total Telecom on the sidelines of the World Telecoms Council in London on Tuesday.

Dobardziev explained that although the operators themselves are calling for consolidation as a way of easing competition, there are a number of barriers to be overcome. For example, according to the terms of their licences, some of India's new mobile market entrants are prevented from being involved in mergers until 2012. Meanwhile, the more established players also have certain restrictions upon them, and there are rules about the amount of spectrum a single player can hold, all of which means there is unlikely to be consolidation in the next few years.

In the meantime, returns on investment are likely to be limited.

"Even the leading players have very thin margins," said Dobardziev. Despite subscriber growth rates of 40%-50%, "revenue growth is in the mid-single-digits on average," he said. And major player Reliance is experiencing negative growth; its ARPU fell to $3 from $9 in the space of three years, the analyst said.

Vodafone's Indian unit is losing money at the net level, Dobardziev went on. If a player of that magnitude is losing money, what future for those greenfield operators that are just starting out, he asked.
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