Etisalat is doing everything but rolling out network sincerely. Since its stake buyout in DB group in 2008, to form telecom venture named ‘Etisalat DB Pvt Ltd’, the company is always in news for wrong reason, I suppose.
Take this example. After buying out 45{af589cdba9d77786c8c861317dbad60bba1e2ebbf56e2ffab874a1b59fde9ce3} stakes in DB group and launching its services in 2009 under brand name ‘Cheers Mobile’, as per TRAI ‘s latest data, the company holds 0.005{af589cdba9d77786c8c861317dbad60bba1e2ebbf56e2ffab874a1b59fde9ce3} of telecom market share. This amounts to mere 30,000 wireless subscribers out of India’s 688 million subscriber base, as on July-2010.
Two days back, Etisalat was in news, when it approached telecom authorities (DoT). Reason: to check possibility of surrendering spectrum & get the cash back. Now again today, the news broke out that, the company is checking the possibility of investing in India’s sixth largest telecom operator by subscriber count- Idea Cellular. Though Idea hasn’t commented officially about the story, the possibility of selling stakes can’t be ruled out, as far as Idea is concerned.
As mentioned in earlier posts, the hyper-competition in telecom sector has almost killed the revenue growth appetite of majority of established as well as start up telcos. Perhaps, that’s the reason Bharti Airtel was on lookout to expand its operations beyond Indian Territory. Now experts believe that Idea’s market capitalization has peaked through these many years and it would be better to sell stakes at this juncture, rather than sailing through rough weather.
Recently Idea Cellular slipped to 6th position in terms of subscriber count, giving way to Tata Teleservices for 5th spot. Even if you tally net monthly additions, then Idea’s 1.8 million net additions in July is just slightly better than Aircel, which is threatening Idea’s position, ever since it made its ambition for pan India presence. Moreover, eroding revenues, ARPUs & EBITDA margin don’t show better prospects of industry overall in future.
Idea has always remained a mid size telco with healthy financial & growth records over years. If you ask me, looking down at next 5 years, if M&A norms are loosen down then, Idea Cellular would among first few companies to accept the offer. For Etisalat, buying stakes in financially healthy mid-sized growing telcos is always a better option rather than buying stakes in India’s second largest debt ridden telecom company.
Good Night!
(Apology for typos…)