Operators’ financial results for the April-June quarter are a definite pointer to the improving key performance indicators (KPIs) of the telecom sector in India. Not surprisingly, potential investors and global players would be taking due note of the development.

Bharti Airtel, India’s largest telco, reported a strong 61 percent rise in quarterly profits, on a year-on-year basis, despite a lower-than-expected performance in the Africa business. The rapidly rising uptake of Airtel’s mobile data in India was also supported by a rise in voice revenues.

No. 2 mobile service operator Vodafone India reported more than 10 percent rise in revenues, while the third largest player Idea Cellular also posted a 57 percent rise in the first-quarter profits.

Telcos have regained their confidence in the market, after a phase of subdued performances, and are also putting in fresh investments to further benefit from a growing mobile broadband uptake.

While Vodafone had already committed to making additional investments in India, as part of its wider Project Spring program, Idea Cellular also signed Nokia Networks for a network modernization deal.

All this could also help accelerate the potential M&A developments or at least large stake sales in the industry. The prevailing debt burdens of the telcos could add to the pressure and consequently catalyze the process.

A tweet from RPG Chairman Harsh Goenka, recently reported widely by the media, is significant in this regard. “MTN doing due diligence of a large Mumbai-based telecom company. Will this mega deal happen?,” the tweet on July 28 had said. Speculations have been doing the rounds since then.

While there are quite a number of large Mumbai-based telcos, two of them have been much pressured and have been looking at ways to deleverage their balance sheets. No marks for guessing, as the two most prospective candidates would be Reliance Communications and Tata Teleservices. The first M&A discussion between MTN and RCom dates back to 2008.

Tata Teleservices has also been reported to be on the block for quite some time now, though nothing has come to a fruitful conclusion yet.

Interestingly, just about three weeks ago, NTT Docomo ended its partnership with Tata Teleservices. The improved KPIs of India’s telecom industry could render the timing of NTT’s exit not-so-good for the Japanese conglomerate. Tata Teleservices, on the other hand, could benefit from the improved investment conditions in the industry. Additionally, the overall positive sentiments developing in the aftermath of the new government coming at the Center would further help.

Is a majority stake sell-off likely by Tata Tele? An answer to this question needs to also be measured in the wake of Tata Group’s Vision 2025, as reported across the media, according to which the Group aims to be among the top 25 companies globally. Will an exit or a majority sell-off from Tata Tele align with that vision or hamper it? The answer to this question would hold the key.

The article was first published on Light Reading India

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