Virtual Consolidation in Telecom Sector

Posted: September 11, 2010 in indian companies, telecom

Inevitability finally catches up with the new entrants in the Indian Telecom industry. It is a no brainer to see that a market with 15 players will not have space for the bottom rankers. Thus new entrants are beginning to scale down the roll out plans and avoiding reduction of the tariffs further. With 14-15 players jostling for share of the consumer kitty, consolidation is now setting into the Indian Telecom markets. In most circles, only about 6 players continue to sustain market momentum. The Top 6 players account for 90% of the market shares by subscriptions and higher shares by value. The intensity of competition is reducing. Some of the new entrants in the telecoms market have not rolled out networks in many circles despite being granted spectrum. All new entrants – with the exception of Sistema – are under investigation 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 obtained their licenses, 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. 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.

Consolidation has also started in the minds of consumers. Even in this crowded market, six operators now bagged the almost whole of the revenue market share, indicating that customers have learnt to recognise bigger, established, stronger, and better brands. The increase in minutes of usage for larger mobile companies is a testimony to the fact that only certain players are present in the minds of consumer. The top 3 Telcos have registered increases in the minutes of usage in the quarter.

Increase in minute of usage (Q2,2010 verses Q1, 2010)
Airtel 3%
Idea 13%
Vodafone 10%

Uninor, STel, Loop, Etisalat DB, Videocon, and Sistema collectively added less than 12% of 18 million customers in June. 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. The new entrants together account for less than 3% of India’s 600 million mobile users.

With 10 million and more subscriptions happening per month, The Indian Telecom Market is the largest growing Telecom market in the world. However, Telco after Telco have made the mistake of entering the Indian Market without a proper and thought through strategy.

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