Going by the global trend, it’s now clear that there can be only 4-5 serious players in India like most of the other mature markets as the industry enters the next phase of consolidation.
With looming payment schedules for the acquired spectrum, pending renewals and stressed balanced sheet in their backyard, most of the telecom service providers are looking for the right partners to align or acquire. As most of them are equally stressed, they are seeking for an alliance of their convenience.
It’s a desperate attempt and an obvious marriage proposed out of their convenience to stay relevant in today’s competitive marketplace and with a sight on better future valuations.
Is it a survival game?
As industry observer, we see this move of RCom and MTS coming together in the deadly war of telecom service providers as an attempt to lift their valuations and high value exit. Till then both will hope for a better turn-around based on external environment like market stability in the coming years, focus on traffic based approach, which will enable them to stay on and survive.
Today, RCom with the revenue market share erosion of more than 40pc (from 11.5 p.c to 6.1 p.c) in the last 5 years, cannot arrest the decline by themselves and it can not suddenly change its gears to grow and bring back the stability into the business.
It’s very evident that a mere 300 million capex guidance cannot fulfill the growing data business need in the country and they will always lag behind to capture the emerging data business opportunities.
While RCom today has few monetizing options like real estate, spectrum holdings, submarine cables, DTH assets and may be their tower business, which can help in unlocking its value, but it will only help in reducing the debt (close to INR 32K Crore) company has on its books. This substantiate the hypothesis of a better valuation and higher value exit.
