Executives atop India’s mobile-phone industry foresee a consolidation that could knock Bharti Airtel Ltd. out of first place in the $26 billion market. The catalyst: free calls and industry debt that has ratcheted up to more than double revenue.Billionaire Mukesh Ambani escalated a price war in September, vowing to reorder the market and luring tens of millions of new subscribers with Reliance Jio Infocomm Ltd.’s free services. Bharti Airtel cited “predatory pricing” when it reported a worse-than-expected 55 percent drop in quarterly profit on Jan. 24.That competitive pressure is drawing attention to possible deals such as an alliance between the country’s No. 2 provider Vodafone India and its third largest, Idea Cellular Ltd., according to people familiar with the matter. Such a combination would overtake Bharti Airtel in number of subscribers.Recurring revenue for all operators in the country will probably rise to about 2.3 trillion rupees ($34 billion) by 2020, from about 1.8 trillion rupees in 2015, industry group GSMA estimates.Reliance Jio’s entry may be the final straw for carriers going it alone in the world’s second-largest mobile-phone market. Ambani amassed 72 million customers in four months by offering free services until April. Now, he plans to invest $4.4 billion more, adding to the $25 billion he’s already spent to take on Bharti Airtel, Vodafone and Idea.“One effect of Jio has been that the small operators are gone,” Billionaire Sunil Bharti Mittal, who controls Bharti Airtel, said in an interview with BloombergQuint at the World Economic Forum in Davos. “I support consolidation in the industry. Wherever we have seen two, three operators with large markets, they have been profitable, they have been able to make large investments.”Bharti’s shares rose as much as 2.3 percent in Mumbai, and changed hands at 317.80 rupees as of 12:20 p.m. in Mumbai. Idea and Reliance Communications gained about 1 percent each. The benchmark S&P BSE Sensex Index rose 0.7 percent.Telenor ASA’s India unit and Tata Teleservices Ltd. are among the smallest carriers facing competition that’s likely to intensify as consolidation proceeds and the next generation of infrastructure demands start to emerge. In all, the country has 11 wireless carriers in an industry that will need to invest heavily to build 5G services, expected to be available by 2020.Prior to Jio’s entry, Airtel, Vodafone and Idea were able to increase revenue and profit, even as they borrowed heavily to pay for spectrum and infrastructure. Now, like the smaller carriers, they will have to find some way to do even more with less revenue.“With each generation of mobile evolution, such as 3G, 4G and now 5G, the cost of upgrading goes up. In telecommunication, returns are all about scale - as the fixed costs of the network are about the same for everyone,” Chris Lane, an analyst at Sanford C. Bernstein, said in a telephone interview. “As you slip down the ranks, you become more and more sub-scale and profitability keeps diminishing.”Possible combinations:Vodafone Group Plc’s India unit and Idea have been in talks to consolidate, according to people familiar with the matter, who asked not to be identified as the talks are private. The talks were first reported by CNBC-TV18 in August. A merger would create a carrier with 387 million subscribers, a 36 percent market share and pan-India 4G spectrum.A deal would also give Vodafone a listing in India, which it has been considering since at least 2011. At reported debt levels, the merged entity would have net debt of 718 billion rupees. Potential risks to the deal include a breach of spectrum limits that could force the merged entity to sell off valuable airwaves in a few circles, according to a report by Sanford C. Bernstein & Co. Idea said speculation of a merger with Vodafone is baseless. Vodafone declined to comment.In a Jan. 19 interview, Mittal said Airtel was in talks to buy Telenor’s India unit, as were most other players in the market. Telenor is one of the market’s least indebted carriers and sat out the spectrum auction held late last year.With a market share of about 4.9 percent, Telenor doesn’t have a pan-India presence. Its airwaves in Uttar Pradesh, India’s most populous state, as well as Maharashtra and Gujarat, would be a plus for any of the top three carriers. Telenor Chief Executive Officer Sigve Brekke said Jan. 5 the Norway-based carrier was still looking at all possibilities for its India business, one of its focuses for 2017. A Telenor spokesman declined to comment.Tata group, India’s largest conglomerate, was seeking a buyer for its loss-making telecom business as recently as late last year -- before the group named Natarajan Chandrasekaran as its next chairman -- according to people familiar with the matter.Tata, which declined to comment, has a nationwide network with spectrum that allows carriers to offer wider coverage, especially in dense cities like Mumbai and Delhi. The company is currently enmeshed in a years-long legal dispute with NTT Docomo Inc. over the value of a stake the Japanese wireless carrier owned in the Indian venture. A settlement of the suit may make it easier for Tata to spin off the unit.In September, billionaire Anil Ambani said his telecommunications company Reliance Communications Ltd. had achieved a “virtual merger” with the operator started by his older brother Mukesh. Investments to roll out fourth-generation services across India will be funded by Jio, the younger Ambani said.Earlier in September, Reliance Communications said it would merge with Aircel Ltd. in a transaction that is scheduled to close this year. In 2015, Reliance Communications agreed to buy AFK Sistema’s Indian wireless unit in an all-stock deal.A merger of state-run carriers Bharat Sanchar Nigam Ltd. and Mahanagar Telephone Nigam Ltd., which operates only in Mumbai and Delhi, has been mooted by the government, but has yet to materialize. Publicly listed Mahanagar Telephone has lost money in four of the past five financial years, losing 20 billion rupees in the year ended March 2016. Bharat Sanchar lost 38.03 billion rupees in the year ended March 2016, it said in its annual report posted on its website.Quadrant Televentures Ltd., which offers services in the state of Punjab under the Videocon Telecom brand, announced it was closing down on Feb. 15. The service, which had 2.97 million customers at the end of October, according to subscription data from the Telecom Regulatory Authority of India, has asked all its subscribers to finish their prepaid balances before midnight on Feb. 15, and switch to another operator. In March 2016, Videocon sold its airwaves in six regions to Bharti Airtel for $663 million.