By any international comparison the countries of South Asia simply have too many mobile operators for each of them to be economically viable. In the developed countries of the Asia Pacific between 2005 and 2010 mobile markets rapidly concentrated, but South Asia has experience a sticky larger number of players. China, Japan, Korea, Australia, New Zealand and Singapore all have three mobile operators today, most of whom already offer tri-play or quad-play. Hong Kong is an exception with four players; Taiwan is an anomaly with six.
But in South Asia, consolidation is badly needed, particularly in the region’s largest market India. This has 12 operators serving a billion subscribers, although few of them offer a pan-Indian service. A look around the other main South Asian markets paints a similar, although not nearly so dire, picture. Bangladesh has six operators, three dominant GSM operators, two smaller GSM operators and a very small CDMA operator. Pakistan has five with a breakdown of two large GSM operators, two medium-sized and one small, while in Sri Lanka there are three larger and two smaller GSM operators.
While India’s operators, who each have a varying number of the 22 regional licenses, are not in competition with each other everywhere, in the most lucrative “circles” up to 8 operators compete with each other. The problem here is not a reluctance to merge, acquire or be acquired amongst operators – indeed there is a frustrated backlog of would-be M&A activity—but outdated M&A rules which make it very difficult.
Despite promises to examine, and if necessary correct, the situation successive governments have failed to do so with the current government so far having ignored pleas from the regulator, TRAI, and the operators’ association COAI to rework the rules and allow market forces to shape consolidation. How long the government will drag its feet and allow the situation to continue is anybody’s guess but the need for urgent action increases by the day as operators and their customers suffer the consequences.
But M&A regulation does not explain everything in every country. Shareholders can also be responsible for keeping an inefficient market structure.
Turning to Southeast Asia, the region’s second-largest market after India is Indonesia with 350 million subscribers—and majority-state-owned Telkomsel has 140 million of these. In addition to Telkomsel there are three medium-sized GSM operators and one small CDMA operator. All of these have just launched LTE using 1800 MHz spectrum and a former WiMAX operator is also soon to launch at 2.3 GHz. Malaysia is another large market where consolidation is needed, with three medium-sized and one small GSM operator, all of whom offer LTE, and two small WiMAX operators planning LTE. Vietnam has six operators, three of which are much larger than the other three.
In all of these markets the talk is of consolidation and during the coming few months and years the next surge of M&A activity, signs of which are already appearing, is likely to come here.