Just a day after Airtel announced an agreement to buy Loop Mobile, ratings agency Fitch said that Mukesh Ambani-backed Reliance Industries could buy a telecom player to increase its spectrum holdings.
Bharti Airtel announced on Tuesday that it has agreed to acquire Loop Mobile – the first merger in the country’s crowded telecoms market in nearly six years.
Reliance Jio, a unit of Reliance Industries, has big plans to enter the telecom arena and it won 14 circles in the recent spectrum auction. Nitin Soni, associate director of Fitch Ratings Singapore Pte, told that the Reliance Jio may look at acquiring a smaller telecom player to increase its spectrum assets.
Reliance Industries has cash and equivalents of nearly $15 billion (nearly Rs. 95000 crore). In the recent spectrum action, Reliance Jio won 78.8 MHz in 1800MHz spectrum. It already owns 20 MHz in 2300 MHz (4G band). This could help Reliance Jio to enter the telecom arena by offering voice and data services.
“RIL has huge investment plans to enter telecom business. The quantity of spectrum they have acquired in the recent auction may not be enough for the large scale plans. So the rationale is that they have to acquire somebody to consolidate spectrum assets and compete directly with the top 3 or 4 four,” he said.
And among the telecom players Videocon looks to be the most likely candidate for RIL to acquire, he added.
Mr. Soni said the Indian telecom needs consolidation. “The industry will not be able to afford more than 6-7 players from the existing number of 12. We believe the recent spectrum auction has clearly spelt out the pecking order which companies will exist in the next five or 10 years,” he said.
The much-awaited guidelines for mergers and acquisitions of telecom companies are expected to be in place within 10 days, Telecom Secretary MF Farooqui said on Wednesday. The guidelines could smoothen out the process for consolidation in the sector.