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Mobile Operators Lost USD 23B in India

Telecom operators have lost around $23 billion during the consolidation drive due to lack of stability in the Indian mobile service provider market, Bloomberg reports.

The $23 billion lost includes impairment charges and losses reported in company filings of global majors from London-based Vodafone Group to Japan’s NTT Docomo — all of whom have exited or suffered.
Vodafone Group, the second largest telecom operator in India, has made a write-off of $8.7 billion ahead of its merger with rival Idea Cellular, the third largest telecom operator in India.

Malaysia-based Maxis Communications, the part-owner of Aircel, has lost $7 billion. Aircel filed for bankruptcy due to tough financial situation.

Telenor Group was forced to write off $4.1 billion before the take over its India business by Airtel.

Japan’s NTT Docomo lost $1.3 billion when it decided to exit from its Indian venture with Tata Teleservices.

Etisalat exited from India in the wake of the 2012 Supreme Court order on 2G scam and lost $829 million.

Sistema has lost $695 million before merging with Anil Ambani-promoted Reliance Communications. RCOM has also reduced its telecom business due to challenging market conditions.

Axiata took write offs worth $356 million. Axiata has 10.66 percent stake in Idea Cellular that will be merged with Vodafone.

Bhuma Shrivastava and Livia Yap of Bloomberg reported that hyper competition in the Indian telecom market has hurt the earnings of the market leader Bharti Airtel. Expensive spectrum auctions and cancellation of telecom licenses in 2012 in the wake of a graft probe made it even harder for the companies to survive.

In 2015, India had a dozen competing operators who were looking for adding the next million subscriber base in India. The world’s second largest telecom market has more than one billion mobile phone subscribers with around a monthly ARPU of $2 making the life tougher for mobile service providers.

The Indian telecom market is going through a tough phase in the wake of competition among Vodafone, Idea Cellular, Airtel and Reliance Jio. Crisil, the local ratings unit of S&P Global, has slashed the outlook on the bonds and loans of India’s top operator Airtel to negative this week citing “intense pricing pressure.”

The entry of India’s richest man Mukesh Ambani’s Reliance Jio Infocomm in 2016 with free 4G services has forced several telecom operators to opt for an exit route without making any money and or sell assets for some money.

“The promise of a market with over one billion potential users is very attractive,” Chris Lane, a Hong Kong-based analyst at Sanford C. Bernstein, said by email. “Too many licenses, too little spectrum, high taxes and supply-constrained airwave auctions has made this a very expensive market to operate in.” – Telecom Lead

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