Reliance Comm sees India telco consolidation

NEW DELHI, Nov 2 (Reuters) - Intensifying competition in the Indian telecoms sector, the world's fastest growing in mobile sign ups, should kick off an industry consolidation in two years, a senior official at Reliance Communications (RLCM.BO: Quote, Profile, Research) said.

With four firms, including ventures of Norway's Telenor (TEL.OL: Quote, Profile, Research) and United Arab Emirates' Etisalat (ETEL.AD: Quote, Profile, Research), set to start operations in India this year, existing players led by Reliance and Bharti Airtel (BRTI.BO: Quote, Profile, Research) have slashed call charges to lure users.

India, which has 11 mobile operators, has this year added an average 14 million mobile users a month. Analysts say still there is huge potential as only 40 people of every 100 own mobile phones from a population of more than a billion.

Call rates in India have dropped to less than 1 U.S. cent per minute, the world's cheapest, squeezing profit margins of companies.

Satish Seth, group managing director at Reliance Communications' parent, told analysts in a conference call on Monday the competitive activity will only increase in the near term.

"The overhang of these developments will accelerate the process of industry consolidation in the next 18-24 months," he said.

Reliance Communications on Saturday reported its quarterly profit halved, on foreign exchange losses, network expansion costs and growing low-paying users. [ID:nDEL128465]

EBITDA margin, a key gauge of profitability, for the wireless business fell to 32.7 percent for the three months to September from 38.6 percent in the preceding quarter.

In response to a question whether the company expects wireless EBITDA margin to improve in the December quarter, Seth said: "The outlook is positive."