What India’s telecom consolidation could trigger
Barely two days after Aircel said it would be filing for bankruptcy, another report says that telecom gears maker Ericsson would be relocating to a much smaller headquarter in India as it prepares to tide over an ongoing market slump.
The telecom consolidation has meant that meant that the services players can no longer afford to support the usual number of suppliers, which earlier too were only a few in number.
I still remember the moment when Ericsson’s current headquarter in Gurgaon was inaugurated in 2004, by the then Swedish Prime Minister, who had reportedly flown in for the inauguration as a primary event. At a later event, the then telecom minister of India, Dayanidhi Maran, had addressed a sizable media gathering at the HQ premises.
In the years that followed, India’s telecom sector became a sunrise sector that went on to attract who’s who of the global telecom brands to the country.
That was the era of mobile voice of course. Ericsson, along with its Finnish rival Nokia, steadily contributed to its shaping. All these years, Ericsson’s existing India headquarter has stood as a key representative of that era.
If Ericsson has been an iconic Swedish brand, Aircel has been no less a brand, especially among those of an Indian origin. At its peak, Aircel was considered among the fastest growing telecom operators and had engaged ace cricketer MS Dhoni as its brand ambassador.
Impact on the industry
It is significant to note that Aircel’s bankruptcy filing would only add to the woes of the suppliers, which include Ericsson, Nokia, and ZTE, among others. Aircel has been staring at a total debt to the tune of around Rs 15,000 crore.
The suppliers, who are already taking steps to downsize their operations in the country, would at least need fresh business volumes if they were to offset the impacts of any Aircel-related write-downs. However, the demand volumes today are not high enough, given the consolidation among the service providers. In fact, once the big-ticket M&A of Vodafone India and Idea Cellular goes through, the demand for telecom gears as well as for managed services would further come down.
Is there a possibility that the telecom consolidation in the services sector could lead to an M&A in the equipment sector as well? Logically yes, except for the fact that with only a handful of gear makers in the fray, there is very little room left for such an event to unfold.
While the India market alone may not be big enough to cause a consolidation in the telecom gears market at the global level, it is still significant enough to provide a cushion. Now, with that cushion weaning away, a consolidation at the global level is getting precipitated.