Bharti Airtel shares, on Thursday, rose over 10% intraday and ended the session over 1.5% higher, following Telenor acquisition announcement. This deal announcement follows the merger announcements by Vodafone-Idea and RCom-MTS-Aircel. The Indian telecom sector is abuzz with M&A news as players look to consolidate in response to increased competition from Reliance Jio’s disruptive pricing model introduced last year.
This consolidation would have significant implications for the sector:
- Industry Structure: Once these mergers go through, there will remain 4 dominant players – Reliance Jio, Idea-Vodafone, Airtel and BSNL. Pygmies like Tata Teleservices, Sistema, Aircel, MTS, RCom will merge or mostly get taken over by the biggies.
- Staffing – The consolidation will lead to massive layoffs, with around a third of 300k employees becoming redundant over the next 18 months, according to an Economic Times report.
- Competition: The price war is expected to continue in the near term as Reliance Jio, despite its decision to end free data services in April, will still be keeping per unit data pricing lower than the other players. However, in the long term, the industry is expected to benefit from reduced competitive intensity, as smaller players get wiped out and there is a higher pricing discipline
- Service Offering: Reduced competition would mean reduced discounts for the consumers. However, in the longer term, economies of scale and reduced competitive intensity would enable players to invest in new networks and services instead of wasting money on price wars.This could eventually lead to better services for customers at lower prices
Read more about Bharti Airtel earnings here