Unified license is bad news: Gartner

BANGALORE: A new single license regime for cellular and basic phone firms in India, one of the fastest growing telecom markets, will hit growth in the loss-making wireless sector, research firm Gartner said.

"With predominantly low-margin prepaid users, the wireless industry could see a price war that will eat into its profits and hurt its prospects as a result," Kobita Desai, principal analyst at Gartner India, said in a report.

India's cabinet scrapped its requirement for separate licenses for each service last month in a bid to stoke growth and end a bitter round of legal battles that have hobbled the country's mobile services industry.

India has more than 27 million GSM and CDMA users and its customer base has nearly doubled in the past seven months as operators lure users with rockbottom call rates.

About a dozen GSM firms such as Bharti Tele-Ventures Ltd, 16 percent owned by Singapore Telecommunications Ltd, and the Indian mobile unit of Hutchison Whampoa are opposing mobile services offered by a handful of basic operators such as Reliance Infocomm Ltd and the Tata group.

Cellular companies say the new system is stacked against them because it allows basic operators to become full mobile carriers and cheaply enter a booming market. They want the earlier system of specific licenses for different services to continue.

The private cellular players have approached India's top court to delay the government implementing its decision to bring basic and mobile services on a single license.

The cellular operators have already invested more than $5 billion in the nine-year-old wireless sector and lost almost $2 billion, and are expected to be worst hit by the new system.

"We also believe consolidation will be a natural consequence of the unified access regime," said Bhawani Shankar, principal analyst at Gartner UK.

© Reuters