In a key move, the country’s fourth largest telecom operator Reliance Communications (RCOM) has entered into an agreement to buy Russian conglomerate Sistema’s Indian mobile telephony business in an all-stock deal. The merged entity will create an operator with 118 million subscribers. If market speculation is to be believed, the new entity may go in for a further merger with Aircel, leading to the emergence of India’s third largest operator in terms of number of subscribers.

Until now, uncertain M&A rules, ambiguity on spectrum trading and sharing and other policy-related issues have prevented industry consolidation despite there being a severe need for it in order to improve sector efficiencies and profitability. Most of the large operators have been seeking acquisitions in order to meet their spectrum needs to support their fast-growing 3G and 4G services. Meanwhile, smaller loss-making companies have been willing to sell due to rising competition and unsustainable operations. But due to the aforementioned policy hurdle, most deals failed to materialise, two examples being Bharti Airtel’s proposed takeover of Loop Mobile and Tata Teleservices’ planned merger with Aircel.

However, with greater clarity now on the policy and regulatory fronts, avenues have opened up for all players to re-draw their M&A strategies and strengthen their play in the data space. The regulator’s latest decision to relax the spectrum caps will further facilitate such deals, allowing smaller operators to monetise their underused spectrum.

As the services industry heads towards consolidation, the telecom tower space is also gearing up for greater market concentration. Initiating this trend, the New York Stock Exchange-listed mobile infrastructure company, American Tower Corporation (ATC), acquired a 51 per cent stake from various shareholders in Viom Networks. The deal is being termed as a win-win for all parties as it has allowed several investors to exit in favour of a single entity with a stronger asset holding.

The recent M&A deals are being seen as positive signs for the next wave of growth to kick in the highly competitive telecom industry, which has been struggling to achieve better efficiencies and improved profitability.