Telecom minister Kapil Sibal on Monday said the India government is expected to announce its on merger and acquisition (M&A) policy for the telecom sector this week.
On November 6, the Inter-ministerial panel Telecom Commission approved the guidelines which will allow telecom companies to acquire operators in a manner that market share of the resultant entity does not exceed 50 percent.
This was welcomed by several telecom operators. But there were criticism as well. Consolidation means for stability to the telecom industry. First response will be increase in mobile tariff to Indian phone users.
The mobile industry is expecting a substantial reduction in the number of telecom operators after the M&A policy. At present, there are around 13 mobile service providers. Telecom operators are facing huge pressure to make profit due to high competition. Consolidation may prompt some telecoms to exit by merging with established players.
Vodafone India, which has around 17.8 percent market share, has already said it has strong financial condition to acquire another company, PTI reported.
Last month, Bharti group chairman Sunil Mittal said that Airtel will look at opportunities to acquire another firm in India, provided that there is a clear M&A policy in place. Airtel has the backing of Singapore Telecom.
Clear M&A policies will also encourage more telecoms such as America Movil to enter the Indian mobile market.