While the big fish in the nascent mobile market are feeding on the small, the cash-rich big guns who had, for some reason, entered the market hesitantly on a modest scale have now understood the need for scale operation, and are experiencing a strong urge to merge. The initiative for the merger was taken by Tata Cellular when it bought out the stake of Bell Canada. For Ratan Tata, who has identified telecom as the focus of his group's future growth, it means a wider reach and concomitant economies of scale. The consolidation wave arises from the industry's growing restlessness with high costs and nil profit. The mobile market in India has been valued by bankers at Rs 22,500 crore, but such valuation is purely notional.
Nobody has a positive cash flow yet.
In the cellular equipment market, unit prices fall exponentially as the orders enlarge. Rs 60 lakh annually. Therefore, the larger the operation, the smaller is the wage component in every rupee of cost. Besides, as Mittal says, the more opportunity the consumer gets to travel over a large area with one service brand flashing on the window of his hand-set, the more he feels comfortable. If Orange is striving to obtain economies of scale, its Indian rivals are anxious to pool in their resources.