Mukesh Ambani back in telecom; WiMAX is dead in India

It all happened in a few hours. Just before the FIFA World Cup started off in South Africa, there was sizzling hot action in the Indian telecom industry. On Day 16 of the bidding for broadband wireless access (BWA) spectrum, the auction ended in just one round.

That's when the surprises started to tumble out. Surprise 1: Infotel Broadband Services Private Limited, owned by Anant Nahata (son of Mahendra Nahata who has been running telecom equipment maker HFCL)won spectrum across India for Rs 12, 848 crore. The other winners included Aircel (8 circles), Tikona Digital Networks (5), Bharti Airtel and Qualcomm Inc (4 each)and Augere (1).

But, even before the ink had dried, came the second big surprise of the day. The $ 44.6 billion Reliance Industries Limited (RIL)owned by Mukesh Ambani in a media release announced that it had acquired a controlling 95% stake in Infotel for Rs 4,800 crore (US $ 1.03 billion)and that Infotel would be a subsidiary of RIL.The message was clear. It would focus on 4G and use TD LTE as the means of achieving that.

The not so surprising action came from younger brother Anil Ambani who welcomed the entry of Mukesh into telecom. Before most people could fathom what all this meant came the next big surprise. Mukesh is reported to have begun talks with Anil Ambani controlled Reliance Communications (RCom) for possible sharing of infrastructure.

So what does all this mean to the sector?

One, WiMAX as a technology is dead in India. The future will be TD LTE. Two, the level of competition will now extend to broadband. One can expect to see enterprise broadband rates come down over the next year. Three, it is very unlikely that RIL will restrict itself to 4G. It is likely to be present across the telecom eco-system, be it 2G/3G, enterprise services.One way out is to pick up a stake in RCom, which is looking for an infusion of cash. The other option is to pick up an existing player with a reasonable subscriber base.

One thing is for sure. Over the next 12 months, India will have just 6-7 large telecom operators. The game is simply over for the new players who managed to get licences and even start services in some circles over the last 12 months. What remains to be seen is how does the leader in telecom, Bharti Airtel react to this development. That could be an interesting play.