Recent takeovers and the growth of India's 4G ecosystem have in theory created the right market conditions for foreign telcos to enter the country. (See India's RCom in Talks to Buy Aircel and RJio Sputters Into Lyf With 4G 'Launch'.)
A number of small operators currently look like ripe targets for acquisitive players following recent merger activity. Reliance Communications Ltd. , one of India's biggest mobile operators, recently bought smaller rival Sistema Shyam TeleServices Ltd. and has also been in talks with Aircel Ltd. over a possible tie-up.
Similarly, Idea Cellular Ltd. , India's third-largest mobile operator, picked up spectrum owned by Videocon Telecommunications Ltd. in two circles (service areas) last year, while Vodafone India -- the number-two mobile player -- is thought to be in talks with Tikona Digital Networks Pvt. Ltd. Operators including Tata Teleservices Ltd. and the Indian arm of Norway's Telenor Group (Nasdaq: TELN) might also be up for grabs.
Yet there are still a number of considerations that might deter foreign operators from venturing into India. "Theoretically, consolidation and the entry of new technologies [4G] present an opportunity to foreign telcos, but in a practical sense the present market scenario would be very difficult for a new entrant," says Amresh Nandan, the research director of communications service provider business at Gartner.
Indeed, foreign telcos' track record will not do much to inspire confidence. Barring Vodafone, none has become a real force in the market and some -- including Bahrain Telecommunications Co. (Batelco) and the UAE's Etisalat -- have been forced to exit the country after struggling to adapt to regulatory norms and find suitable partners.
"A number of foreign telcos, like AT&T, Deutsche Telecom and others, have displayed interest in the Indian telecom market over the years," says Nandan. "However, they didn't move forward because of various reasons, such as the local policy environment, competition and difficulty in finding an appropriate local partner."
Moreover, the Indian market still remains highly competitive. And with the commercial launch of 4G services by Reliance Jio in 2016, competition is set to intensify. The tariff war is likely to move to data from voice.
"From a governance perspective, also, it has not been very easy," explains Nandan. "Things did look bright when the new government took over about two years back. However, there are still a number of issues where policy is concerned. Policies around spectrum allocations and pricing continue to be a big issue. It is unclear at what stage is harmonization of spectrum. Foreign telcos might find the business environment difficult to handle."
Foreign telcos might stand a better chance as mobile virtual network operators (MVNOs). Last year, the Telecom Regulatory Authority of India (TRAI) proposed bringing MVNOs within the licensing framework. The enterprise segment, especially in the Internet of Things and M2M areas, could represent a particularly attractive opportunity.
— Gagandeep Kaur, contributing editor, special to Light Reading