Ongoing consolidation in India has prompted the unceremonious exit of foreign telcos from the Indian market. From Vodafone India to Aircel, these operators have one after another bitten the dust.
While India's vast population has been a strong draw for operators from outside the country, the difficulties of operating a business in the Indian market have ultimately taken a heavy toll.
Recent deals illustrate the point. Telenor India, an operator controlled by the Norwegian telecom incumbent, was acquired by market leader Bharti Airtel Ltd. (Mumbai: BHARTIARTL) in early 2017, having struggled in India for many years. It is thought to have invested about $3 billion in India over that period, but never enjoyed a smooth run. Its pan-India licenses were cancelled in 2012, and it was operating in only six circles (service areas) at the time of its acquisition.
MTS, the only pure-play operator of outdated CDMA networks, is also thought to have spent about $3 billion on its Indian operations, but was acquired by Reliance Communications, currently India's sixth-largest operator, about two years ago. While it took a 10% stake in Reliance Communications Ltd. as part of the agreement, that stake is unlikely to be worth much given RCom's huge debts.
Yet the most surprising departure of recent years is probably that of Vodafone. India's second-largest operator, Vodafone India announced plans to merge its business with number-three player Idea Cellular Ltd. earlier this year. A never-ending tax dispute with the Indian government, along with the hyper-competitive market environment, finally forced it to quit the market as a standalone player.
Another firm that is finding the going tough is Aircel, India's fifth-biggest operator, which is backed by Malaysia's Maxis. A proposed merger with RCom is now off, leaving the fate of Aircel Ltd. unclear. With a huge debt of around 155 billion Indian rupees ($2.39 billion), it might be forced to wind down its Indian operations.
While bigger players have undoubtedly faced regulatory opposition, smaller telcos have suffered the most from the arrival in late 2016 of disruptive new entrant Reliance Jio. That firm's predatory pricing tactics drove these companies quickly toward the exit door.
After consolidation plays out, it is likely that only three private sector operators (Bharti Airtel, Idea-Vodafone and Reliance Jio ) and one government-backed telco (BSNL-MTNL) will remain in the market as national players. This would mark the end of an era in which a number of foreign telcos tried to profit from the growth potential of the Indian market.
While each company has its own unique story, the fact remains that India's market requires a fundamentally different approach. With a population of more than a billion people, it clearly still offers huge potential. Yet the combination of extremely low average revenue per user and high spectrum costs demands innovation in network strategy as well as in business operations. Simply replicating best practices elsewhere might not be the right strategy.
— Gagandeep Kaur, contributing editor, special to Light Reading