No dearth of spice and ideas

Who’s next on the block after Spice? That was the question on the lips of market men and investment bankers last fortnight after Aditya Birla group company Idea Cellular acquired a 41 per cent stake in B.K. Modi’s Spice Communications. Most of the consolidation, it would seem has happened, with the industry largely controlled by five-six big players. But hold on: Don’t forget the new players who recently received licences to start mobile telephony operations. The Department of Telecom, early this year, issued telecom licences to Videocon, Unitech, Shyam Telecom, Idea and Tata Teleservices, amongst others. A couple of them—Venugopal Dhoot’s Videocon and real estate major Unitech—have no prior experience in telecom services.

Bankers also don’t rule out some regional players who could be up for grabs. One such operator is Shyam Telelink, which has a unified service access licence for the Rajasthan circle and operates basic telephony, mobile telephony (CDMA) and broadband services; it has some 200,000 subscribers in the bag. “There is a possibility of further consolidation in the telecom industry,” says Saurabh Agrawal, Managing Director, Technology Media and Telecom group, DSP Merrill Lynch, who advised Idea in the Spice acquisition. According to him, bigger players like Bharti Airtel, Reliance Communications, Tata Teleservices, and Vodafone will be pan-Indian players; and with the acquisition of Spice Communica-tions (along with the new licences it has bagged), Idea Cellular is set to be the next national player.

The biggest factor that will trigger further consolidation is a spectrum crunch. “New players have not yet got the desired spectrum, and this could be a hurdle for them in starting operations,” says an investment banker who declined to be named. He adds that many of the new telecom players, particularly those with no track record in the business, are looking at creating an asset and making a quick buck.

—Virendra Verma