Consolidation in the Indian telecom sector, in a meaningful way, would cause us to turn more positive on the sector. The new entrants/smaller telcos hold only 3% subscriber and 1% revenue market share so a potential market exit of these players will have a limited industry impact. TRAI recommendations, outside of the removal of the three-year lock-in for promoters, do not support the case for in-market consolidation, in our view. While the recommendations may be diluted before being accepted, we don’t expect them to be dismissed completely.
Although on headline numbers India has 13-14 operators, the top six telcos control ~91% of the subscriber market share and ~94% of the revenue market share. Including Aircel here, we note that the top seven players have ~97% subscriber share and ~99% RMS. Based on this data, even in a scenario of an exit of all the smaller telcos, the opportunity up for grabs is limited
Of the five large greenfield operators (Etisalat, Loop, MTS, Videocon, Uninor), Uninor has been the only player which has impacted the market to some extent. While Videocon and MTS have also rolled-out, Loop and Etisalat are yet to launch commercially. We continue to believe that greenfield operators are unviable and industry consolidation is the only option in the medium term.
As we approach year-end, we see two triggers (3G and MNP) driving competition in the high-value segment. Here we expect the competition to be among the larger players.