Consolidation to happen in mobile telephony sector: Analysts

The Supreme Court’s order on Thursday cancelling 122 telecom licences issued by the UPA government will result in consolidation by existing players and freeing of pricing power to the incumbent players, say sector analysts.

“The Supreme Court’s decision is positive to for the sector on the whole and there is bound to be consolidation as some of the players may not go in for the auction route stipulated by the apex court,” Ankita Somani, research analyst (Telecom) with Angel Broking, told IANS.

There are 14 telecom players in the country. Another analyst, preferring anonymity, said: “Consolidation is bound to happen as some of the existing players may not participate in the auctions. The existing players may now be able to revise upward their rates. There were not able to do so due to the competition.”

He said the established players like Bharti, Vodafone and others who did not get the specturum in 2008 are now better positioned as compared to the new players. The court judgement would set right many of the policy and structural issues so that the serious players in the sector as a whole can move forward.

“The unused spectrum would now come back into the system and the scarce resource would be put to efficient use,” he added. It would be interesting to note whether the government would be able to raise huge sum from spectrum auctioning.

The Comptroller and Auditor General (CAG) had estimated the loss to the exchequer under the old sale price at Rs.1.76 trillion.

“It all depends on the number of bidders and the kind of money they are willing to pump in,” a Mumbai based analyst told IANS on condition of anonymity. Analysts are also of the view that the Supreme Court judgement would also have its impact on the mobile telephony tower companies and the equipment vendors.

“The new development may be positive for independent tower companies. But the issue has to be studied,” Somani added.