Scarlets director Ron Jones says Welsh rugby cannot afford to run four regional sides and that at least one of the sides must go.
Former Scarlets chairman Jones also told S4C's Newyddion programme it is "difficult to have faith" in the leadership of the Welsh Rugby Union (WRU) as it is "afraid to make difficult decisions".
He said the WRU has been "too focused on team Wales" and is unwilling to face the financial realities of Welsh rugby and cut the number of regional teams in the country.
Wales has four professional teams - Cardiff, Dragons, Ospreys and Scarlets - and Jones said: "The idea that we can afford four professional clubs in Wales is for the fairies."
The WRU said recently an agreement with the four regions had been reached in principle which will "safeguard the future" of the professional game while keeping them in existence.
For over 25 years, businessman Jones, who founded and is now executive chairman of the Tinopolis TV company based in Llanelli, has been a board member with the Scarlets rugby club and region.
Following the departure of Warren Gatland as head coach of Wales' men's national team on Tuesday, Jones gave a wide-ranging interview about the current state and future of Welsh rugby.
Responding to Gatland's departure, he said it was "so sad the union didn't take their responsibility [to part ways with Gatland] earlier and act in a way they must have realised was in the best interest of Welsh rugby", claiming he "had clearly lost the support of the players from the survey of the players done before Christmas".
After a 14-Test losing streak, Gatland's second tenure of the national team abruptly ended midway through the Six Nations tournament.
The WRU says it held a thorough review after last year's autumn series which concluded it would not have been in the team's benefit for the head coach to leave at that stage.
Off the field, the WRU has faced a difficult few years.
A proposed player strike was called off at the last minute two years ago and separately a damning independent review found aspects of the WRU's culture was sexist, misogynistic, racist and homophobic.
For over a year, a new leadership team has been in place, with Abi Tierney appointed chief executive and Richard Collier-Keywood made chairman in 2023.
But Jones' appraisal of their performance was devastating.
"One has to question how can you take so long before any decisions are taken or any improvements are seen in any single aspect of Welsh rugby," he said.
"I think journalists have been slow to ask what has actually happened, what has changed for the better during their time?
"This is a long time they (Tierney and Collier-Keywood) have been there now - in most parts of business, they wouldn't be given the luxury of a year without having to make any announcements about what they think needs to be done longer-term and actually showing evidence things are happening.
"It's difficult to have faith in the union at the moment when one can't see where the acceptance of the financial realities of the game are.
"Welsh rugby is in huge financial trouble and we don't seem to be able to react sufficiently to deal with what could be a fatal amount of damage to the game unless we balance what we're doing with the money we think is coming in."
Tierney has said there are "systemic problems" facing Welsh rugby which "are really hard to change quickly" and that some changes have already been made.
Despite being a director at one of the regions, Jones says there is no option but to cut at least one teams.
"We are not a big enough nation now to have the commercial clout to [have four regions]," he said.
"We probably no longer have the player pipeline that can sustain four clubs. I don't think the union is gong to be able to deliver longer-term the increase in their own revenue if they are going to support the game at club level and regional level."
Regional rugby was established in 2003, initially with five teams before a reduction to four.
"With sadness, we have to come down to three or two regions to reflect the financial realities of Welsh rugby," added Jones.
"Over the years, there's been a fear inside the union of criticism and so difficult decisions get deferred.
"We've seen that with Gatland's dismissal. I think we're going to be seeing it as well with the decision to stay with four regions when, in their gut, they must know that it isn't the right way forward to present a good future for Welsh rugby."
The WRU has said the deal with the regions will "increase finances and other supporting factors to levels which will enable continued success and sustainability long into the future and by 2029".
"This decision to sustain four regional clubs and not reduce in number divides opinion in Wales," Jones went on.
"Many I have spoken to are supportive and are excited to see what the increased collaboration and investment will bring for Welsh rugby.
"There are equally those who say that either, objectively, the right decision has not been made or that we have lacked decisiveness in general."