Indian mobile telephony market booms, but not for operators

Consolidation in the 15-player market, which is the world's second-largest with more than 600 million users and growing by 16 million a month, looks at least a year away unless rules change.

Just-completed auctions for 3G and broadband airwaves cost far more than expected.

They also reintroduced an unpredictable 900-pound gorilla to the market in Mukesh Ambani's Reliance Industries, India's biggest listed firm, which bought the only company to win country-wide broadband wireless spectrum.

With newer entrants backed by foreign players such as Telenor, Sistema and Etisalat ramping up service, rock-bottom tariffs continue to fall, to the detriment of market leaders Bharti Airtel, Reliance Communications and Vodafone's Indian unit.

"With 12 players in the circle it would be too bullish to expect that 12 players will behave rationally," said Vsevolod Rozanov, president and CEO of Sistema Shyam Teleservices, the Russian firm's Indian subsidiary, whose ongoing rollout will be bolstered by a $600 million investment by the Russian government.

"Of course price erosion will continue," he said.

Text: Reuters | AP and Reuters Images

Also see: Ambani truce reopens key sectors for Mukesh