market exit


We have been talking about the absence of clear market-exit rules in the countries we work in. The examples keep piling up. Indian operator Aircel may have no other option but to shutter its operations following the collapse of its merger with Reliance Communications (RCom). The operator has debts of around US$3.7B and continues to make losses.
So I was asked why Airtel was quitting Sri Lanka, the first foreign market they entered. Here is the summary of what I said. Perhaps because it was its first foreign excursion, Airtel was very slow to roll out. In May 2007 they signed an investment agreement. I commented then that the amount committed was too small for a rapid rollout.
My response to incessant complaints in the region about profits disappearing and investment drying up because of excessive licensing has been to say that liberal and transparent market entry policies must be accompanied by clearly stated exit policies that are consistently enforced. I have also pointed out that in many South Asian markets the levels of competition, as measured by the HHI, are relatively higher than in the US and that what applies in S Asian markets does not necessarily apply in N American markets and vice versa. In this light, it is worth tracking what happens to the AT&T acquisition of T Mobile. AT&T customers, though, could benefit in one notable area: service. Both AT&T and T-Mobile operate on the same technology, known as GSM, so the combination should provide better coverage.
I was asked today by a reporter whether the Sri Lanka market could support another entrant. I answered, but wasn’t sure it would be carried accurately. Therefore, here is the answer. The market should determine the number of suppliers in a market, not government officials. This requires two things: (1) an orderly policy on market exit, whereby, for example, suppliers have clear rules on what can be done about the assigned spectrum, existing customers, and so on; and (2) transparent license and renewal procedures that allow for as many licenses to be issued as possible within the constraints of spectrum.