According to global rating agency, Standard & Poor (S&P), the Indian telecom market is entering a new phase of growth where the top three players will drive the competition.
S&P states that since 2009, competitive intensity has been determined by new entrants like Tata Teleservices Limited, Uninor and Sistema Shyam TeleServices Limited among others. For a few years, it was smaller players and new entrants which shaped competition in the Indian market with price wars. However, going forward, the rating agency expects intense competition in India?s telecom industry to slowly moderate as a result of consolidation.
The rating agency underlines that the country?s leading three players – Bharti Airtel, Vodafone India, and Idea Cellular are likely to strengthen their market position because smaller players are likely to find it increasingly difficult to acquire additional spectrum at high prices and lack the scale to run profitable nationwide operations.
Moreover, a supportive and stable regulatory policy framework will also drive growth in the sector. Earlier, regulatory ambiguity on issues like 3G roaming pacts led to cancellations, penalties as well as legal disputes for the country?s leading operators.
S&P notes that the government has announced merger and acquisition policy for the telecom sector. The positive move on consolidation has already resulted in a deal where Bharti Airtel will acquire Loop Mobile. The rating agency underscores that though regulatory risks for the telecom sector in India are higher than those in other countries, the risk profile has improved following the government?s move to allow spectrum trading.
Despite, signs of revival in the industry, S&P states that aggressive and prolonged price wars, including those in the data segment, along with the entry of new players could also impact the Indian telecom industry?s growth.
