More M&As likely in mobile phone industry: ICRA

By SiliconIndia   |   Friday, 16 July 2004, 07:00 Hrs
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NEW DELHI: Declining prices and lower average revenue per user will endanger the survival of the weaker players in the mobile service industry forcing them to enter into strategic alliances and divest equity in favour of stronger players, according to ICRA's sectoral perspective.
While market expansion will take place for mobile companies, falling prices and lower ARPUs will endanger the survival of some of the weaker players who then would be forced to enter into strategic alliances or divest equity in favour of strong players, ICRA said.

The agency warned that in spite of high subscriber growth, the possibility of low revenue growth, low profitability and continued accumulated losses could inhibit the flow of long term financial investments into the industry.

A slower growth in revenues and increased network investments to meet increased demands would imply that most of the operators would not be able to wipe out their accumulated losses soon, it cautioned.

However, there would be increased switch over to mobile from fixed line, ICRA said adding the implementation of unified licensing for basic and cellular services is expected to result in increased competition for GSM cellular companies and CDMA services which will lead to lower prices for consumers and stimulation of demand. This is likely to lower costs because of economies of scale.

"Mobile service price premium will then decline and fuelling further market expansion and increased fixed-to-mobile substitution", it said.

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