Three of India’s telecom service providers are apparently contemplating merging their forces and forming a single large telecom company. According to few sources Tata Teleservices, Russia’s Sistema JSFC and Aircel have been involved in extended exploratory talks for a three-way merger. Though individually these three players do not control significant subscriber base as compared to market leaders Airtel and Vodafone combined these entities could very easily become the single largest telecom service provider in India.
How are the companies formulating the merger?
Apparently, talks between Tata Teleservices and Sistema to merge forces have been taking place in private, for quite some time. But discussion to merge Tata Teleservices and Aircel are quite nascent and such a difference will play a crucial part in finalizing the finer points of the deal.
If effected, neither Tata nor Aircel, who are majorly Indian entities may stand to be the major or dominant shareholder. This is because of the heavy financial backlog that these companies will bring to the table. Both Tata Teleservices and Aircel have been struggling to pare their debt; around Rs. 23,000 (US$ 3.65 Billion) Crores and Rs. 22,000 Crores (US$ 3.5 Billion), respectively. Whereas, Sistema is cash rich as it is partly owned by the Russian government and operates in India through a joint venture with Shyam Telecom.
Each of the companies has high hopes of long–term sustained future from the deal. In the past, we have witnessed the rocky presence of Sistema. Boggled by multiple setbacks, the company needs stable players to establish a strong footprint. Meanwhile, Aircel and Tata can substantially curtail their capital and operating expenditure by merging and jointly utilizing their financial resources. Additionally, all three can share infrastructure and usher a new era of seamless city–wide networks that can include WiFi grids too.
India is now on the tip of radical changes and hopefully improvements in the field of telecommunications. Do you think such large–scale consolidation will eventually mean higher subscription charges owing to relatively lesser competition?
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