CIOIN

What do you think of the verdict?

I think it’s a move by the Supreme Court to start getting our house in order. There has been a virtual paralysis in terms of decision making and regulation. It’s a step in a direction that will bring more transparency and accountability. 

The verdict will also bring a shakeout in the industry. This will have an impact on the newer operators. This shakeout, by which I mean consolidation, was expected. Consolidations could follow the regular M&A route, with the larger operators acquiring the smaller ones. Consolidation could be driven by regulators or a judicial process. In this case, the verdict by the Supreme Court will be a trigger.

 Which operators will cease to exist because of this?

That’s a difficult question. But this is what is sure: According to the judgment, operators who want to continue will have to bid again for spectrum. That means that only players with deep pockets and a strong business cases will continue to exist. There will be some who think it will be more prudent to bail out. 

How many do you think will survive this shakeout?

Hard to say. But we’ve always maintained that for a market like India, the optimum number is around five to six operators. That’s what this market can sustain. Otherwise you have a situation where everyone is bleeding to death.

Are we going to see the same bidding frenzy and high valuations in the coming bidding process as we did during the 3G auctions?

I think operators have learnt their mistakes. By mistake I mean the high valuations they put in 3G. And I don’t see them repeating the same mistake.

Clearly they have a sense of where this is headed and what are the monetization opportunities that exist. Moreover, the level of bidding activity largely depends on the number of players that want to continue. If that number is rationalized, you probably won’t see that level of activity. 

What’s the first thing an operator with a cancelled license should do?

The first move is to try to get a better sense of what this verdict really means. There are still some loose ends over how they are going to be compensated for whatever they have invested.

They also need firm up their plans. They have a good sense of the market now. They need to figure out if it really makes sense to stick on; do they want to stay for the long haul; and is there really a business rationale to continue. Most these players are the ones that have marginal subscribers; they don’t have the high-value enterprise customers and have low ARPUs. With that sort of subscriber base, how much can you scale the business and what’s the payback for entering into a bid situation for spectrum. These are the questions that need to be asked—again.

How will this affect customers?

What this will essentially do—and consolidation always does that—is to put the power of pricing back into the hands of the bigger players. That is what we are going to see. We have already seen some price increases. That will continue as a trend, where pricing will no longer be under pressure and will probably be dictated by a few larger players. I would expect pricing to move up.