Rating agency Fitch has published a note on the likely road ahead for the telecom sector, say news reports.
The agency has said that in the long run, the telecom space in India can support only six profitable mobile operators.
Currently, as pr the firm, smaller telecom companies are struggling to gain market share and register positive EBITDA. Also, their strategy of relying on the fast-growing data market is no longer viable. Such players are unable to achieve meaningful scale and generate significant profit amid competition from larger telecom companies.
Subsequently, the firm is of the opinion that consolidation will be witnessed in the sector, as the smaller operators may either get acquired or will merge with each other to improve their financial status. This is expected to help such players arrest declining profitability as cost synergies may be realised and voice tariffs will benefit from lower competition.
Mergers are also expected to lead to lower capex, as network infrastructure investments will not require to be duplicated.
This development, however, is subject to the sector gaining clarity over guidelines pertaining to merger and acquisitions and, in particular, spectrum acquisitions.
