Consolidation of telco industry is necessary to remain sustainable — Celcom

Idham: Sooner or later, I think that consolidation [of telcos] will happen, or has to happen. Because it is very difficult for this number of players to all remain profitable, or able to make a profit and continue to invest. It's such a small market. (Photo by: Mohd Suhaimi Mohamed Yusuf/The Edge)

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KUALA LUMPUR (Sep 12): Axiata Group Bhd's mobile arm Celcom Axiata Bhd says there needs to be a consolidation of network operators in order to keep the telecommunications industry sustainable.

Celcom chief executive officer Idham Nawawi said the telecommunications market is getting more competitive, and that in the long run, "hyper-competition" may have a negative impact on the market.

"If you look at other markets that are close to home, you will see that the markets have consolidated to about three to a maximum of four operators in each of those markets. That is a trend that is happening globally," he said during a media briefing today on Celcom's business performance.

"[The question is] whether the market will be able to sustain the number of players that we have today. Most likely, one way or another, it (consolidation) will happen.

"Sooner or later, I think that consolidation [of telcos] will happen, or has to happen. Because it is very difficult for this number of players to all remain profitable, or able to make a profit and continue to invest. It's such a small market," Idham added.

He cited issues within the telecommunications industry such as the need for continuous high investment to maintain its service, competition of the same and limited number of subscribers, as well as the growing demand for new technologies that is difficult to keep up.

When asked if there needs to be government intervention to encourage consolidation within the industry, he said: "One way or another, the market will take care of itself."

Idham's comments on the telecommunications industry came on the heels of the news that Axiata Group and Telenor ASA (the parent company of Digi.Com Bhd's largest shareholder Telenor Asia Pte Ltd) have mutually agreed to end discussions on the planned non-cash combination of their telecommunication and infrastructure assets in Asia.

After four months of conducting due diligence on the corporate exercise, Axiata and Telenor decided to terminate the proposed merger due to "some complexities". Although both parties acknowledged the strong commercial merit of the merger, it did not provide any further reason why the arrangement failed.

Idham today refused to comment on the failed merger, saying he is not in the position to do so on behalf of Celcom's parent company Axiata, but maintained that it is "business as usual" for Celcom.