Indian Startups Seek Exit

11:40 AM -- The fiercely competitive Indian telecom services sector might be about to claim some victims. According to The Economic Times, some startup operators have approached the government to figure out how they might exit the market.

The report names Swan Telecom (now known as Etisalat DB) as one company that has approached the Department of Telecommunications about handing back its license and spectrum, and getting a refund of its license costs.

Etisalat DB (Swan), which has signed up very few customers since it launched its services a few months ago, was one of a number of new entrants awarded spectrum in January 2008. (See India Adds 18M Subs in June and Indian Gov't Grants Mobile Licenses.)

The others, which have all also launched their services, were: Unitech, which is now Uninor ; S Tel Pvt. Ltd. ; Loop Telecom Pvt. Ltd. ; and Datacom, now Videocon Telecommunications Ltd.

The startups certainly need some kind of help from the government. Current regulations concerning ownership lock-in periods and spectrum allocation caps have prevented mergers and acquisitions that would almost certainly have taken place by now. (See Easy on the M&A.)

Some of the startups are seeking new investors -- see this Bloomberg story -- but so far without success.

The question the industry is asking now: If the government won't change some of its ownership rules, or enable an affordable exit option, what will become of India's struggling operator startups?

— Gagandeep Kaur, India Editor, Light Reading

Sunderjeet 12/5/2012 | 4:24:32 PM
re: Indian Startups Seek Exit

This is interesting. Although it was certain that mkt is going to be real tough for the new entrants espl for the greenfields like Videocon, i didn't expect the startups to go back to govt for help.

rajsri 12/5/2012 | 4:24:27 PM
re: Indian Startups Seek Exit

It was crazy that so many of them went in to get the spectrum allocation. It was always going to be difficult to compete and gain market share among the already established players which number to around 6. On top of that the ARPU's are already very low and even the existing operators are struggling to push revenues up. It was crazy and to extent stupid for these companies to have gone and participated in the spectrum auctions. Even though some of them treated it like a speculative buying (real estate model) assuming the existing operators will pay hefty sums to buy back the spectrum license. The government used the opportunity to rack up competition and push the auction price and get loads of money. It would have served better for both the existing operators and customers if the government had opened the auction only for the existing players so that they could have offered better service by not have to spend so much money due to inflated spectrum prices and could have provided services at lower costs to its customers.

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