Consolidation in the Indian Wireless Industry Signifies New Market Momentum and Opportunities

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1Q 2017 | IN-4468

Despite being a market heavily courted by foreign technology vendors, such as Apple, Xiaomi, and Amazon, the wireless infrastructure market in India is lagging behind. Furthermore, a new wave of mobile network operators (MNOs) consolidation is emerging. This Insight looks at the current status and future impacts of Indian MNOs consolidation.

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Wave of Consolidation


The Indian wireless industry is experiencing a new wave of consolidation. This started with the merger conversation between Vodafone India (204.6 million subscribers) and Idea Cellular (190.5 million subscribers) to create the largest mobile network operator (MNO) in India. Bharti Airtel (265.8 million subscribers), the current largest Indian telco, immediately started its negotiations to acquire Telenor India (54.4 million subscribers), and a deal is likely to finalize in Q1 2017. At the same time, a three-way merger between Reliance Communications (86.5 million subscribers), Aircel (90.8 million subscribers), and MTS India is currently in the works. There are also rumors that Reliance Communications will merge with Reliance Jio.

If all these mergers are approved by the Telecom Regulatory Authority of India (TRAI) the major players in the Indian wireless industry will be reduced to Bharti Airtel, Vodafone, Reliance Communications, and BSNL. Regional players like Tata, MTNL, Sistema, and Quadrant will remain active in their respective markets, but are unlikely to create concern for big players.

Why Are These Mergers Important?


A similar trend can be observed in the European wireless market back in 2016. Hutchison Three was in talks to acquire Telefónica’s O2 in the U.K., while Orange was looking to acquire Bouygues Telecom to consolidate its operation in France. Even though both deals collapsed in the end, these negotiations show the overall wireless market is heading toward consolidation. Additionally, Tele2 acquired TDC Sweden for US$352 million in June 2016. During her interview with Bloomberg at Mobile World Congress 2017, Allison Kirkby, chief executive officer at Tele2, commented that as MNOs move toward monetization of data, MNOs are getting into the triple-play or quad-play offering, and that business strategy requires strong subscriber base and capital resources in order to be successful.

In India, these mergers are essentially the big MNOs’ response to the rapid success of Reliance Jio. Incorporated in September 2016, Reliance Jio, a pure-play LTE network operator, has the widest coverage area and the largest LTE subscribers, approaching 90 million. To further improve its network coverage and quality, Reliance Jio reaffirmed its relationship with its RAN vendor Samsung, engaged Airspan to deploy 50,000 small cells in 2017, and is currently working with Cisco to develop a 5G-ready network based on Cisco’s Open Network Architecture and Cloud Scale Networking technologies.

Given the low profit margin in the Indian market, traditional MNOs are struggling to address the connectivity demands from customers from all 22 telco circles. Created by the government back in 1990s, telco circles ensure healthy competition among service providers. This resulted in different spectrum prices and availability, customer requirements, and willingness to pay. By mid-2016, Telenor was reportedly looking to exit the Indian market as it continued to experience losses. The accumulated losses restricted Telenor’s capability to launch 3G and 4G coverage and services, resulting in its failure to compete with LTE network operators such as Reliance Jio.

New Opportunities Emerge Through Consolidation


These mergers are likely to better prepare the remaining players to focus on market opportunities beyond voice and mobile Internet. In some cases, the merger between different players generate the needs for network modernization. Legacy BSS, OSS, and network operation centers from different entities will likely be merged and virtualized. Processes such as service assurance, service fulfilment, and network-wide policy implementations will be automated to boost operation agility. Often, mobile network operators also adopt big data analytic solutions during network modernization.

At the same time, incumbent MNOs need to understand that the price war started by Reliance Jio is not likely to go away soon. Bharti Airtel is one of the key MNOs that partnered with Google in the launch of Android Messages based on the RCS solution. Incumbent MNOs also need to look at smart city projects and industrial IoT deployments in India, as well as other adjacent markets or verticals. In short, MNOs must start to acquire new capabilities through the aforementioned network modernization and network function virtualization to allow them to venture into other industrial sectors.