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Airtel expects 5-6 mobile operators in India after shakeout

February 27, 2014 18:44 IST

A child playing with a mobileBharti Airtel on Thursday said consolidation in the country's telecom sector will take place through a combination of acquisitions, spectrum trading and sharing and India will eventually have 5-6 mobile operators.

"There has to be some form of shakeout where you end up with five, may be six, operators.

“That will happen through a combination of three things – acquisitions, spectrum trading and sharing," Bharti Airtel Joint Managing Director and Chief Executive Officer (India Operations) Gopal Vittal told PTI.

He said consolidation is needed because the spectrum holding of individual operators in India is very small because of which costs are high.

"If you look at the spectrum that is made available to operators in India, it is only around 40 per cent of the global average.

“This amount is divided into many operators, so the holding of individual operators is very small.

“Now the consequence of that is higher cost, more cost, more towers, more diesel," he said.

According to rating agency Fitch, India can in the long run support five-six profitable telecom operators.

Currently, there are about a dozen players, with many making losses.

Airtel, India's largest telecom company, recently bought Mumbai-based Loop Mobile for about Rs 700 crore (Rs 7 billion) and was among the eight companies that bid for spectrum in an auction this month.

The operator's licences in Delhi and Kolkata are due to expire in November.

Asked if companies had paid a high price for spectrum in the 900 MHz band, Vittal said, "We had an existing business to protect and we had to defend that business and pick up that spectrum in order to run our business."

He added that the company had bought spectrum as an asset, anticipating enormous demand.

"In 20 years, how much change is going to be, we don't know. . . I think the need for spectrum in this market is going to be so enormous going forward that we would be sitting five years later and saying thank god we've got spectrum," he said.

Vittal, however, added there should have been more spectrum put up for the auction.

Bharti Airtel, Vodafone, Idea Cellular and Reliance Jio Infocomm bought most of the spectrum in the recently concluded auction for the 900 MHz and 1800 MHz bands, which fetched the government bids worth Rs 61,162 crore.

Asked about tariffs, Vittal said voice realisations are currently at unsustainable low levels and must go up over the next few years.

"Second point is that there is still a big gap -- almost 30-40 per cent -- between the headline tariff and discounted tariffs that actually operate. I think that gap needs to be bridged," he said, refusing to say if Airtel would increase tariffs in the near future.

On the launch of 4G services in additional areas, Vittal said the company will follow a wait-and-watch policy.

There are still very few devices for these services and they are expensive, so Airtel will wait and watch, he said.

Image: A child playing with a mobile; Photograph: Reuters

Kiran Rathee in Barcelona
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