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Yahoo! My Yahoo! Mail More Yahoo! Services Account Options New User? Sign Up Sign In Help Yahoo! Search web search Home Singapore Asia Pacific World Business Entertainment Sports Technology Singapore Asia Pacific World Mergers key to survival in India's crowded mobile market AFP - 2 hours 17 minutes ago Send IM Story Print Mergers key to survival in India's crowded mobile market Slideshow: Full Photo Coverage: Business & Economy NEW DELHI (AFP) - – Mergers are the only way forward in India's crowded mobile phone market, where 14 operators are slugging it out for subscribers by offering the cheapest rates in the world, analysts say. On the face of it, business is booming in a market that is growing at a staggering rate, with between 16 and 20 million new subscribers signing up every month. In the past year alone, the number of mobile customers soared 49 percent to 617.5 million, meaning that 55 out of every 100 Indians now has a mobile -- compared with just three out of 100 in 2000. But those figures hide a much tougher market reality. Competition has cut call costs to far below one US cent a minute and a recent auction for superfast third-generation (3G) wireless spectrum saw operators load up on debt to buy licences. Mergers are "inevitable -- this number of players is unsustainable," Kunal Bajaj, India director of consultancy Analysys Mason, told AFP. British giant Vodafone has written down the value of its Indian unit by a quarter -- three years after paying 11 billion dollars for control of one of the market leaders Hutchison Essar. Share prices of market leader Bharti Airtel have fallen by 40 percent from a 12-month peak, while second-placed Reliance Communications' stock, controlled by Indian billionaire Anil Ambani, has slid by a similar amount. Bharti, led by tycoon Sunil Bharti Mittal, announced its first quarterly profit fall in three years, and Ambani has put 26 percent of Reliance Communications up for sale to pare hefty debt. Also suffering are new players -- local ventures partnered with global companies such as Norway's Telenor, Japan's DoCoMo, Russia's Sistema and Gulf operator Etisalat. "Subscriber growth will continue -- that's not a problem -- but price wars are damaging the sector," said Harit Shah, analyst at Mumbai brokerage Karvy. A fresh round of price cutting is expected in October when the government is due to introduce number portability, allowing users to keep their mobile number while swapping operators. The damage caused by the price erosion can be seen in the fall in average revenue per usage, or ARPU -- a key industry profitability measure which shows the amount companies make for every minute a client talks. With tariffs going as low as a fraction of a US cent a minute, ARPUs have tumbled by an average 30 percent for companies from a year earlier. The number of operators in India was fuelled by the initial, ultra-low phone ownership levels and buoyant profits enjoyed by early players, which prompted companies to pile in. Most markets support five to six mobile operators, while in giant neighbour China there are just three, noted Karvy's Shah. "Things have gone a bit out of control," he said. Balance sheets have also been weighed down by massive prices paid for 3G and broadband licences in May, when operators shelled out a total of 22 billion dollars to the government -- far more than originally projected. Analysts say 3G is expected to transform the Indian mobile landscape in the long-term. But 3G services won't boost bottom lines anytime soon because companies must spend billions of dollars upgrading their networks to offer faster Internet browsing, movie downloads and video streaming. As a result, analysts expect the number of players to fall to six to eight over the next 24 to 30 months, with the first merger action to come next year as lock-in periods for investors in start-up ventures start ending. "A lot of merger and acquisition opportunities are already being worked out. Every company knows the situation is not sustainable," said Shetty. In the meantime, the next couple of years are "going to be one of the most difficult times in the telecom space with margins under severe pressure," he said. 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