Indian telecom survivors target rivals' users

Mumbai/New Delhi: Vodafone is wasting little time in capitalising on a blockbuster Indian court verdict that's likely to shake up the world's second-largest mobile phone market.

Within hours of a Thursday ruling by India's highest court that all licences awarded in a scandal-tainted 2008 sale be revoked, jeopardising the operations of a handful of smaller carriers, the UK giant ran front-page newspaper ads inviting users of rival networks to sign up for its service without having to change their phone numbers.

Beneficiary of ruling

Vodafone, the world's largest carrier by revenue and the number-two in India, is a major beneficiary of a ruling that is likely to accelerate the winnowing of an industry crowded with more than a dozen competitors.

Norway's Telenor, the most active among a wave of new entrants following the 2008 award of licences, told Reuters on Thursday it may pull out of India after the court ruled all the licences held by its local joint venture be revoked. It said in a statement on Friday it intended "to fight to protect our lawful investments in the country."

If Telenor, whose joint venture with Unitech operates as Uninor, left, it would benefit Bharti Airtel, Vodafone, Reliance Communications and Idea Cellular, which have long sought consolidation.

Mahesh Uppal, director at consultants Com First (India), said the verdict is a "huge blessing" for the biggest operators. "Not only because the reduced competition is de facto consolidation, but also because the spectrum supplies which seemed to be drying up for them, are now plentiful again."

Auction coming up

The biggest carriers struggle with service quality on their overstretched networks. The court ordered the telecoms regulator to come up with rules to auction the spectrum in four months.

"The speculators will exit, the serious ones will bid," Uppal said.

An exit by smaller carriers would also open a window for a return to telecoms by Mukesh Ambani's Reliance Industries, which in 2010 unexpectedly bought the only company with nationwide 4G spectrum, but has not launched a service.

Fierce competition, exacerbated by the wave of new licences issued in 2008 by former telecoms minister A. Raja, now in jail awaiting trial over the auction, has prevented carriers from turning rampant user growth in India into big profits.

BNP Paribas analyst Kunal Vora said the market could shrink to seven carriers. "We believe most new entrants are unlikely to bid in a future spectrum auction," he wrote in a note.

That's still too many, according to Vodafone's India chief, Marten Pieters, who told Reuters in November India can sustain four or five players.

Both Bharti and Vodafone are expected to be among the buyers of competitors, once rules allow.