M&A Trends and Financial Performance of Telecom Companies during Pre& Post Merger

M&A Trends and Financial Performance of Telecom Companies during Pre&
Post Merger

2013

A PROJECT REPORT ON

M&A TRENDS &FINANCIAL PERFORMANCE OF INDIAN
TELECOM COMPANIES DURING PRE AND POST MERGER

SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR
MASTER OF MANAGEMENT STUDIES
TO
UNIVERSITY OF MUMBAI
BY
MAYUR ASHOK NAHAR
ROLL NO. 2011212
2011-2013

UNDER THE GUIDANCE OF

PROF. CHARU UPADHYAYA

LALA LAJPATRAI INSTITUTE OF MANAGEMENT
MAHALAXMI, MUMBAI – 400 03

1

Internal research report:- Mayur Nahar

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EXECUTIVE SUMMARY
Mergers and Acquisitions (M&A) activity has always been recognized as one of the
most important means of inorganic growth for corporate world. The swift
globalization and increasing strength and importance of Indian Economy in the World
have created huge interest of world in Indian corporate sector and the capital market.
Last two financials years have seen tremendous increase in the M&A‘s deals
involving Indian companies, both in number and in value terms. Year 2008-09
recorded 600 deals with total value of US$ 32 Billion whereas in the year 2009-10 it
closed at 595 with a total disclosed value of US$ 31 billion.
Indian telecom industry is the second fastest growing telecom market in the world
after China. The overall Tele-density India has reached 60% at the end of January
2013.The growth has been fueled by progressive policies of TRAI and deregulation.
The telecom industry is changing at a rapid pace with constantly changing policies,
new players, alliances and partnerships being announced on a daily basis.

In this study, I have looked at various M&A transactions that have taken place in the
recent past. After doing a broad review, I have focused on three specific events,
namely, Idea Cellular takeover of Spice Telecom, Bharti takeover of Zain and
Vodafone hutch deal I have identified the following trends and drivers in the industry
Global ambitions of Indian Telecom giants will see acquisitions and joint ventures in
growing African and South East Asian markets.
Telecom players are also looking to tap into global funds to finance their aggressive
growth plans.
New license holders will continue to look to grow and expand in market
New policies will seek to curb this license arbitrage.

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Smaller players with operations in only a few circles will find in difficult to compete
with the nationwide players. The industry may see consolidation with these smaller
operators being acquired by the larger ones.
―Unbundling of the corporation‖ will continue as companies will seek for economies
of scale and lower cost by infrastructure sharing

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INDEX

SR. NO

CONTENT

PAGE NO.

1

INTRODUCTION

1-4

2

REVIEW OF LITERATURE

5-12

3

TELECOM SECTOR OVERVIEW

13- 29

4

RECENT PARTNERSHIPS, MERGERS AND ACQUISITIONS

30-41

IN INDIA
5

MERGERS AND ACQUISITIONS

42-54

6

FINANCIAL PERFORMANCE

55-61

7

VALUATIONS DRIVERS OF TELECOM INDUSTRY

62-69

8

REGULATORY ENVIRONMENT IMPACT

70-75

9

FINDINGS OF THE STUDY

76

10

CONCLUSION

77

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Introduction and Research methodology
1.1 Introduction
A company may grow internally, or externally. The objective of the firm in either case
is to maximizethe wealth of the existing shareholders. Most corporate growth occurs
by internal expansion, whichtakes place when a firm‘s existing divisions grow
through normal capital budgeting activities.
Themergers, takeovers referred to collectively as CorporateRestructuring, have
become a major force in the financial and economic environment all over theworld.
The industrial restructuring has raised important issues both for business decisions as
well as forpublic policy formulation. On the more positive side, M & As may be
critical to the healthy expansionof business firms as they evolve through successive
stages of growth and development. The successful Entry into new product markets
and into new geographical markets by a firm may require M & As atsome stage in the
firm‘s development. The successful competition in international markets may
dependon capabilities obtained in a timely and efficient fashion through M & As.

The objective of my project is to study the Telecom industry in India and understand
how the recent trends are driving Mergers, Acquisitions and Partnerships in this
industry. I will study recent partnerships, merger and acquisitions that have taken
place in this industry. I will focus on the following the following deals in the industry
to gain deeper understanding of the M&A nuances in this industry:

1) Idea Cellular takeover of Spice Telecom: It is a deal that will throw light on the
consolidation trends in theIndian Telecom industry.
Bharti Airtel takeover of Zain Africa
Vodafone takeover of hutch
Studying the drivers in these deal will help me understand the global expansion trends
in the IndianTelecom industry.

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The above three deals will provide me with deeper understanding of both
consolidation and global expansion trends in this industry.

1.2 Objectives
 To study the recent trends those are driving mergers, acquisitions and
partnership in telecom industry.
 To study the impacts of regulatory environment on telecom sector
 To measure the financial performance of pre and post-merger companies in
the sector.
 To find out the critical factors that induces merger of telecom companies.
 To summarize the findings and offer a conclusion.

1.3 Scope of study
It is important to improve the competitiveness and quality of the telecom sector in
order to enhance its efficiency. Mergers take place in the Indian context in line
with the trend of consolidation that has characterized the financial services
industry and, in particular, the telecom industry. Companies over the world over
have been merging at a furious pace, driven by the urge to gain synergies in their
operation, derive economies of scale and offer one-stop facilities to a growingly
more demanding clientele. Hence the desire to grow quickly through mergers
rather than through the slow and tortuous path of normal expansion in business.
Merger seems to lead to financial and strategic growth. The financial and strategic
management aspect of merger is to be analyzed from several angles. The present
study is about the evaluation of financial performance of mergers before and after
mergers in the telecom industry.

1.4 Significance of the study
Measuring the value that mergers and acquisitions create is an inexact science.
M&A and their financial performance are merged to know exact impact on
compnies
Using my research policy maker 360 degree view of industry and current
situation.

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My research provide way to think on valuation & financial performance of
Industry and market situation
One benefit of this approach is that it provides a measure of expected value
unaffected by other variables, such as subsequent acquisition

1.5 Research Methodology:i)
Hypotheses of the Study
The present study tests the following null hypotheses.
Ho1.Their is no effect on the liquidity, solvency and profitability position of the
companies post merger.
Ho2. The merged telecom companies did not expand their business activities after
merger.
ii)
Methods of Collection of data
For the purpose of study secondary data will be collected from the Prowess
Corporate Database Software. Also, the data will be collected from Annual
Reports, Published Research Reports by various industries and research
organization, books, periodicals and websites
iii)
Sample size
The sample size comprises of Indian telecom companies.
iv)
Research instrument
In order to conduct the study financial statement analysis will be conducted on the
data collected. Also, ratio analysis will be performed to compare the performance
of telecom companies in India.
v)
Research Limitation
The research is limited to only the telecom policy and its effect on the telecom
industry overall aspects of telecom industry

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2. Review of Literature
Article 1- Financial Performance of Indian Manufacturing Companies during
Pre and Post Merger
Author: S. Vanitha&M. Selvam , (2011)JFMR – Issue 2

Abstract:Corporate Restructuring has become a major component in the financial
andeconomic environment all over the world. Industrial restructuring has raised
importantissues for business decisions as well as for public policy formulation. Since
1991, Indianindustries have been increasingly exposed to both domestic and
international competitionand competitiveness. Hence, in recent times, companies have
started restructuring theiroperations around their core business activities through M &
As.
Link:-www.journaloffinancialmarketsresearch.com/ISSUES/JFMR_2_06.pdf

Article 2 :- National Telecom Policy – 2012
Abstract:- Telecommunication has emerged as a key driver of economic and social
development in an increasingly knowledge intensive global scenario, in which India
needs to play a leadership role. National Telecom Policy-2012 is designed to ensure
that India plays this role effectively and transforms the socio-economic scenario
through accelerated equitable and inclusive economic growth by laying special
emphasis on providing affordable and quality telecommunication services in rural and
remote areas
Link: - http://www.dot.gov.in/ntp/NTP-06.06.2012-final.pdf

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Article 3 - 2013 Outlook: Indian Telecommunication Services
Author :- (2013) India rating & research
Abstract:India Ratings‘ outlook on the Indian Telecommunication services sector remains
negative for 2013 considering increasing regulatory costs for incumbent and new
operators. Uncertainty in regulations, which was the key credit risk in 2012,has now
been replaced by increasing costs which will impact most operators, including the
incumbents over the short-to- medium term.
With the exit of three small telecoms and fewer licenses with Videocon and Uninor,
there is limited room for further consolidation. While there may be some corporate
action involving small operators, India Ratings does not expect any M&A activity
involving large operators in the short-term.
While some regulatory developments will have a uniform impact on all the operators,
others will have a different degree on impact on different operators. A high reserve
price will be negativefor all operators, whereas a staggered payment mechanism and
liberalized use of spectrum willbe positive for all operators. In case of spectrum refarming and one-time fees, India Ratingsdoes not expect a positive impact on
operators.

Link:
http://indiaratings.co.in/upload/research/specialReports/2013/1/18/fitch18Indian.pdf

Article 4 - Innovating the Telco Business Model - Capgimini
Author - Jerome Buvat(2011)
Abstract:The operating environment for telcos is turning increasingly complex. Telecom
operators who had grown on the back of traditional voice and data services are
realizing that as consumption patterns are rapidly changing, value not only moves to
other stages in the telco value chain but also into completely different markets.
Subsequently, their old business models are coming under increasing pressure and
appear to be crumbling.

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Some telcos have understood this rapidly evolving scenario and have taken steps to
ensure that they are in tune with the changing times. How else can one explain the
fact that a fiber operator convince sits customer to dig up the last mile connectivity, or
that a telco enters into reselling energy and gas agreements, or that consumers in
certain markets have opted for advertisements to be a core part of their mobile
experience? These developments represent only a fraction of the innovation in
business models that telcos canpartake in. They, in turn, are being driven by a range
of broader trends that are currently impacting business models the world over. Telcos
should consider taking steps to incrementally change their business models, while
striving to adopt radical approaches in select areas, and challenge traditionally
accepted norms of where a telco fits into the larger ecosystem.
Link:- www.teralytics.ch/resources/telco_business_models_capgemini.pdf

Article 5:- India Telecoms Sector
Author: - Credit Suisse (23 Feb 2012) - Sunil Tirumalai
Abstract:India‘s telecom penetration (as a % of GDP) is similar to the regions The traditional
metrics of measuring levels of telecom maturity (such as subscriber penetration) could
have limitations when applied to India which is significantly younger and poorer than
other markets. Instead, looking at the size of its telecom industry in relation to the
overall economy, we believe that the sector is nearing mature penetration already.
30% of the Indian population is under 15 years old and probably not a ready market
for telecom services Low income levels also mean that a portion of
the population may not be able to afford telecom servicesMobile net adds in India
have come down
While it is reasonable to assume that the fall in net adds is a result of tariff hikes
The reported mobile penetration numbers for India continue to remain lower than for
other
Asian markets This is more true for VLR (Visitor Location Register)-based
penetration at 54% (VLR data is not easily available for other countries). This gives
the impression that the near-term growth potential for India is high
Link:https://www.creditsuisse.com/conferences/aic/2012/doc/web/20120227_indiatelco.pdf

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Article 6 -Impact of TRAI’s spectrum recommendation on Consumers and
Industry
Authors:-Mohammad Chowdhury(2012) - PWC
Abstract:―Analysis of effects on costs, tariffs and financial returns‖ published on 12th July
2012. In this paper TRAI states that they have attempted to address the concerns
raised by various stakeholders and re-computed the incremental impact of their
Recommendations (including Reserve Price) on per minute costs and profitability
across the sector. In the present analysis, TRAI has partially considered cost
implications with respect to spectrum rights and outgoing calls. TRAI also provides
analysis on potential impacts to the industry in terms of EBITDA, PBIT and ROCE.
TRAI continues to assume high minute‘s growth and this does not align with past
industry trends in all countries around the world which show a long-term decline in
MOU per subscriber over time. Per TRAI estimates, Minutes of Use (MOU) per
subscriber per month will grow from 327 in FY‘12 to 410 by FY‘16. This is in
contrast to the last four years where MOU per subscriber per month has declined from
455 minutes in FY‘08 to 327 minutes in FY‘12.
Additional impact due to policy changes is considered on and above normal business
returns industry has witnessed over the years. Impact of reduction in spectrum usage
charges, spectrum reframing opex, spectrum reframing capex and spectrum cost is
considered over business as usual assumptions to derive impact on industry due to
proposed policy changes
Link:-http://www.pwc.in/en_IN/in/assets/pdfs/publications-2012/trairecommendationvol-II.pdf
Article 7 :- Telecommunications
Authors:Abstract:Margins and profitability to remain under pressure due to intense pricing competition
and network expansion. RIL‘s possible entry into voice to limit tariff hike
Valuations near historic lows are justified given the decline in profitability & low
business returns, with no visible signs of turnaround in near term. Spectrum renewals
and other regulatory payouts to further weaken the balance sheet
Cut earnings estimate for Bharti & Idea and downgrade the stocks to REDUCE with
revised TP of Rs228 & 72, resp. RoE and RoCE for Bharti and Idea have declined to

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single digit. Muted operational performance going forward rules out near term
improvement in profitability & healthy business returns.

Article 8:- Valuation drivers in the telecommunications industry

Authors:- Vincent de La Bachelerie (Ernst & young ) 2012
Abstract:M&A activity in the telecommunications sector has resumed, led by transactions in
emerging markets.
Valuation multiples are higher for players in high-growthmarkets than in mature
markets.
There is a consensus on the nature and average weight of the assets recognized and
valued as part of purchase price allocation (PPA).
Subscriber relationships are generally the primary intangible asset in PPA, with a
weight of around 33% of the enterprise value (EV).
Goodwill remains significant, with a weight of 60% of the EV, thus reflecting the
growth potential of certain targets, as well as the importance of synergies expected
from any successful integration.

Article 9:- Measuring Post Merger and Acquisition Performance:
An Investigation of Select Financial Sector Organizations in India
Author :- (2010) Dr. Neena Sinha & Dr. K.P.Kaushik -International Journal of
Economics and Finance
Abstract :The present paper examines the impact of mergers and acquisitions on the financial
efficiency of the selected financial institutions in India. The analysis consists of two
stages. Firstly, by using the ratio analysis approach, we calculate the change in the
position of the companies during the period 2000-2008. Secondly, we examine
changes in the efficiency of the companies during the pre and post merger periods by
using nonparametric Wilcoxon signed rank test. While we found a significant change
in the earnings of the shareholders, there is no significant change in liquidity position
of the firms. The result of the study indicate that M&A cases in India show a
significantcorrelation between financial performance and the M&A deal, in the long
run, and the acquiring firms were able to generate value.

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Strategic alliances and Mergers and Acquisitions (M&A) are the dominant corporate
strategies followed by organizations looking for enhanced value creation. The
growing tendency towards mergers and acquisitions (M&As) world-wide, has been
driven by intensifying competition.
Link :- http://www.ccsenet.org/journal/index.php/ijef/article/view/4917

Article 10 :- The future of M&A in telecom - McKinsey & Company, Inc
Authors : -(2011)Jean-Christophe Lebraud & Peter Karlströmer
Abstract :-

Mergers and acquisitions have been a mainstay of the telecom industry for many
years. In the past decade, the telecom industry has spent an astounding USD 1.5
trillion on M&A activities, investments that have transformed the industry landscape
into the competitive playing field we see today. However, the motivations behind the
transactions have evolved over time, and we believe the industry is on the cusp of a
new wave of M&A activity driven by some of the disruptions now taking place.over
80 percent of aggregate deal value has focused on core telecom services and spectrum
license market segments, with the remainder targeted toward adjacent markets such as
infrastructure, connectivity providers, multimedia and financial services
The extent to which operators can gain scale benefits, and whether they can achieve
these on a cross-border basis.
The amount of in-country consolidation that regulators will allowOperator decisions
to expand aggressively in non-core areasCan we improve our position domestically
through M&A?
leaders should work to align their corporate strategy and M&A plans. We believe this
will be more important than ever now, since many operators today are making
significant shifts in their strategic direction and it will be important that their M&A
goals are aligned to support the new overall strategic direction in a good way.
Telecom players need to transform their M&A capabilities and ways of working to
proactively pursue a wide breadth of opportunities that align with their strategic
requirements. This could mean ensuring that the M&A team is set up correctly and
has the right capabilities and capacity. Leaders should clarify their M&A approach,
organization and the way they source deals globally, and work closely with investor
relations to ensure they have the right story to tell the capital markets

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Link : - www.mckinsey.com/~/media/mckinsey/.../Telecoms/PDFs/M_A.ashx

Article 11 :- Growth of Mergers & Acquisitions (M&A)
In India in the Telecom Industry
Authors : - ( 2012) Anjan Babu K &Dr. Aisha.M.Sheriff )
International Journal of Management & Information Technology Volume 1, No 3

Abstract :-

With more than 500 million subscribers, India is the second largest mobile phone
market in the world after China. In the last decade, an average of 15 Telecom
operators has started operations in India. The market has been flamboyant for Indian
as well as Foreign investors. Many of them are entering through the Merger and
Acquisition route. The Governing Regulatory Authorities have a responsibility that no
irregularity occurs and that every investor is given equal opportunity. Spectrum which
is a constrained essential input for mobile services is also highly fragmented leading
to possible industry inefficiencies. This paper critically examines the Merger and
Acquisition scenario in the Telecom industry in India and the current policy
framework that provides policy prescriptions for the future.

Link :- cirworld.com/index.php/ijmit/article/download/13-MIT-209/pdf

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3 . Telecom Sector Overview
Today, India is one of the fastest growing telecom markets in the world. The
unprecedented increase in teledensity and sharp decline in tariffs in the Indian telecom
sector have contributed significantly to the country‘s economic growth. Besides
contributing to about 3% to India‘s GDP, Telecommunications, along with
Information Technology, has greatly accelerated the growth of the economic and
social sectors.

Telecommunications is no longer limited to voice. The evolution from analog to
digital technology has facilitated the conversion of voice, data and video to the digital
form. Increasingly, these are now being rendered through single networks bringing
about a convergence in networks, services and also devices. Hence, it is now
imperative to move towards convergence between telecom, broadcast and IT services,
networks, platforms, technologies and overcome the existing segregation of licensing,
registration and regulatory mechanisms in these areas to enhance affordability,
increase access, delivery of multiple services and reduce cost. It will be a key enabler
of equitable and inclusive growth. The policy aims to address and enable the
coordinated action to respond to the dynamic needs resulting from confluence of
telecom, broadcasting and IT sectors.

The PSUs have played a pre-eminent role in provision of telecom services in the
country, particularly in rural, remote, backward and hilly areas. Contribution of BSNL
and MTNL to broadband penetration in the country is significant. The importance of
PSUs in meeting the strategic and security needs of the nation can also not be
understated. This policy recognizes that these PSUs will continue to play such
important role

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3.1. Regulatory environment

3.1.1) Department of Telecommunication (DOT)
Telecommunications is one of the few sectors in India, which has witnessed the most
fundamental structural and institutional reforms since 1991. Considering the great
potential for the growth of telephone demand with the accelerated growth of
economic activities, the Government of India announced the National Telecom Policy
in 1994 and the New Telecom Policy in 1999. The National Telecom Policy provides
for private sector participation to supplement the efforts of DoT in basic telephone
services. The opening up of the basic services provided a big opportunity for private
& foreign investors. More policy initiativesincluded Addendum to NTP -1999,
Broadband Policy 2004, Amendment to Broadband Policy 2004 etc.
The opening of the sector has not only lead to rapid growth but also helped a great
deal towardsmaximization of consumer benefits. The tariffs have been falling
continuously across the board as result of healthy and unrestricted competition.

The Telecom Commission and the Department of Telecommunications are
responsible for policyformulation, licensing, wireless spectrum management,

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administrative

monitoring

of

PSUs,

research

2013

anddevelopment

and

standardization/validation of equipment etc.

3.1.2)TRAI
Telecom Regulatory Authority of India (TRAI),is an independent regulatory
Authority under the TelecomRegulatory Authority of India Act, 1997 (as amended in
January 2000). Under the TRAI Act, TRAI carries out various functions. It is
empowered to make recommendations, either suo-moto or on a request from th
Licensor on a wide range of matters. These include
 the need and time for introduction of a new service provider;
 terms and conditions of a telecommunications license;
 revocation of licences;
 measures to facilitate competition and promote efficiency in the operation of
telecommunication
 services;
 technological improvements in services;
 specifications as to the type of equipment to be used by the service providers;
 measures for the development of telecommunication technology and ―any
other matter[s]
 relatable to [the] telecommunication industry in general;‖
 efficient management of spectrum.

It is mandatory for the Licensor to seek recommendations from TRAI on the need and
timing for
introduction of a Service Provider and terms and conditions of License. TRAI's
recommendations are notbinding on the Central Government.

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Some other functions of TRAI include:
 ensuring compliance with terms and conditions of telecom licenses;
 fixing terms and conditions for inter-connectivity between service providers;
 ensuring technical compatibility and effective inter-connection among
different service providers;
 regulating arrangements among service providers for sharing revenues;
 laying-down standards for quality of services;
 prescribing and regulating periods within which local and long distance
telecommunication circuit
 are to be provided by service providers;
 maintaining a register of inter-connect agreements;
 ensuring effective compliance with universal service obligations.
 fixation of tariffs

TRAI is empowered to issue directions to the service providers for discharge of these
functions. The main objective of TRAI is to provide the affordable telecom services
by creating competition in the telecom sector. But at the same time also ensuring that
the competition is fair and not determinant to the interest of any section of society or
service providers.

3.1.3) Foreign Exchange Management Act (FEMA) Guidelines
Foreign Exchange Management Act, 1999 (―FEMA‖):
FEMA and the various rules, regulations, circulars, etc. issued under FEMA
consolidate the law relating to foreign exchange with the objective of facilitating
external trade and payments and promoting the orderly development and maintenance
of the foreign exchange market in India. The provisions of FEMA specify the current
and capital account transactions which may be carried on with general or specific
permission of the RBI and/or the FIPB. The two most relevant regulations under
FEMA from an M&A perspective are:

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I. Foreign Exchange Management (Transfer or Issue of Security by a Person Resident
Outside India) Regulations, 2000 (―FDI Regulations‖): The FDI Regulations and the
press notes issued there under govern investments by persons resident outside India in
shares, debentures (convertible and nonconvertible), security receipts and warrants of
companies

incorporated

in

India;

in

effect

regulating

inbound

investments/acquisitions.
In most sectors, 100% foreign direct investment is permitted (with or without
conditions) without the prior approval of FIPB. In certain sectors it is permitted only
to the extent prescribed, subject to conditions set out in the sect oral policy, without
the prior approval of FIPB. Hostile takeovers on a cross border basis are effectively
precluded.

II. Foreign Exchange Management (Transfer or Issue of any Foreign Security)
Regulations, 2004 (―Foreign Security Regulations‖): Outbound investments by
residents in India are regulated by the Foreign Security Regulations. Indian companies
are permitted to invest up to 400% of their net worth in joint ventures or wholly
owned subsidiaries abroad under the automatic route.

3.1.4)Securities & Exchange Board of India (SEBI)
Securities & Exchange Board of India (SEBI) regulations are applicable to listed
group of Companies. For Telecom M & A the regulations are as followsRegulation 10- Acquisition of shares- Describes the substantial of shares for which
public announcement is prerequisite. In this case acquisition by an acquirer to
exercise 15% of voting rights require a public announcement

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Regulation 11- Deals with the consolidation of holdings, primarily where an acquirer
holds shares less than 55% & wishes to acquire more. Secondly, where an acquirer
acquired more than 55% but less than 75% requires a prior public announcement.

3.1.5) CCI
Competition Commission of India (CCI), established in 2003, held statutory
responsibility for ensuringfree and fair competition in all sectors of the economy. The
Competition Act, 2002 had provided for a liberal regime for mergers, whereby
combinations exceeding the threshold limits fell within the jurisdiction of CCI.
Most competition laws in the world require mandatory prior notification of every
merger to the competitionauthority but under Indian law it was voluntary. However,
CCI could also take suo motu cognisance of a merger perceived as potentially anti
competitive and it could enquire until one year after the merger had taken place. Once
CCI had been notified, it must decide within 90 days of publication of details of the
merger or else it is deemed approved. The CCI could allow or disallow a merger or
can allow it with certainmodification.
The Competition Act has not come into force in its entirety. Once enforced in its
entirety, it will repeal the
MRTP Act and dissolve the MRTP Commission. The Competition Act prohibits anticompetitive agreement and abuse of a dominant position. It also regulates
combinations of enterprises and persons. The acquisition of enterprises by persons or
the merger or amalgamation of enterprises is considered to be a combination and
requires filings with the Competition Commission of India, but only if the thresholds

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of their assets orturnover exceeds the value stipulated in the Competition Act. The
Competition Act seeks to ensure fair competition in India through a body known as
the Competition Commission of India (CCI)

3.2Key players in market

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Major players are summarized below.
BSNL: BSNL recorded a revenue of Rs 35,296 crore in the last fiscal, down from Rs
40,135 crore in FY 2006- 07, a decline of 12.1%. The company is looking at new
business streams to increase revenue and reduce losses. BSNL is toying with the idea
of entering into managed network services and enterprise business, which will add
value to mobile as well as landline. Apart from this the company is also looking at
adding IPTV and VoIP services in its portfolio. BSNL would also be investing Rs
15,000 crore for the next three years in a bid to return to its profitable position. Like
other service providers, BSNL is also planning to focus on the rural segment in the
coming years. BSNL leads the broadband segment, as far as subscribers are
concerned. Currently, the company has 2 mn out of the 3.9 mn subscribers in the
country.

Bharti: Bhari Airtel as it crossed the magical figure of 50 mn subscribers in the
country. The customer addition has taken its revenue to Rs 26,436 crore in FY 200708, clocking 47.8% increase. The company has also formed an alliance with four
global IT majors: Alcatel Lucent owned Mobilitec, Germany-based CoreMedia, USbased Adamind and UK's Apertio for its service delivery platform. Continuing with
itsstrategy of focusing on its core business and outsourcing the rest, Bharti signed a
$35 mn three-year outsourcing deal with BPO service provider, Firstsource Solutions.
Bharti will be launching operations in SriLanka later this year and is investing $200
mn for the same. The company also launched its DTH services. Bharti is focusing on
the rural and enterprise segments as its growth areas.
Reliance: Reliance Communications recorded an increase of 71% in its net profit.
And an increase of 28.8%in its revenue, which is Rs 18,638 crore in fy 2007-08. It
received start-up GSM spectrum last year. It has huge expansion plans in rural India.
It also expanded globally with acquisition of UK-based Vanco and Uganda-based
Anupam Global Soft. In a landmark deal, Reliance partnered with Microsoft to deliver
IPTV in India on the latter's mediaroom platform. Reliance Communications will
have the exclusive deployment rights for the platform in India.

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Vodafone: Vodafone Essar achieved 46.5% rise in telecom revenue in India with its
income from operations touching Rs 15,477 crore in FY 2007-08, up from Rs 10,565
crore in the previous financial year. Vodafone entered India through its acquisition of
Hutchison Essar stake.
Tata Communications: The Tata-run VSNL created a significant landmark when it
announced financial results for the last fiscal-an astounding growth of 85%, to touch
Rs 8,857 crore. VSNL's transformation has helped it lead in segments such as
wholesale voice, wholesale and enterprise data, and retail broadband; and ensured
global infrastructure and global customers.
Telecom Equipment Players
The top equipment players in the Indian telecom space are Nokia, Ericsson, Nokia
Siemens Networks, Alcatel-Lucent, Cisco, Sony Ericsson, Huawei and ZTE.

3.3 Recent trends
The world in the last decade has seen a boom in the number of mobile subscribers.
Fixed line subscribers on the other hand have remained more or less flat or down with
some increase in the developing markets. Figure below shows that the trends of
mobile subscribersin the period 2003-2013

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Mobile-cellular penetration, 2013*, and mobile-cellular subscription growth rates,
2005-2013*

In 2013, over 2.7 billion people are using the Internet, which corresponds to 39% of
the world‘s population.
As global mobile-cellular penetration approaches 100% and market saturation is
reached, growth rates have fallen to their lowest levels in both developed and
developing countries.
Mobile-cellular penetration rates stand at 96% globally; 128% in developed countries;
and 89% in developing countries.

Mobile-cellular penetration, 2013*, and mobile-cellular subscription growth rates,
2005-2013*

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Households with Internet access, 2013*

Internet users by development level, 2003-2013*, and by region, 2013*

The number of internet subscribers in India is on a steady rise. Many of the wireless
service providers are also providing internet services to their subscribers.
Indian Market

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Source: - Airtel Annual presesntation 2013
Current state of the Telecom industry
Subscriber addition for the industry declined to 19mn in Q1FY13 v/s 21.5mn in
Q4FY12 (share in net adds for Bharti increased from 20% to 40% in Q1FY13).
Telecom industry is expected to report 4% qoq growth in Q1FY13, driven by 4% qoq
growth from Bharti. On the back of lower subscriber addition and stable MoU/sub
going forward, we estimate industry traffic growth at 10%/8% yoy in FY13E/14E v/s
13% in
FY12. Slowing voice growth and muted data growth is a cause of concern in highly
competitive voice market.

3.4 Growth Drivers in telecom sectors
Key factors, which will fuel the growth of the sector include increased access to
services owing to launch of newer telecom technologies like LTE , 3G and BWA,
better devices, changing consumer behavior and the emergence of cloud technologies.
A majority of the investments will go into the capital expenditure for setting up newer
networks like 3G and developing the backhaul,among other things.
 Subscriber Base
The mobile subscriber base in India is estimated rise by 9 per cent to 696 million
connections this year, according to technology researcher Gartner. The mobile service
penetration in the country is currently at 51 per cent and is expected to grow to 72 per
cent by 2016.
 Mobile Value Added Services (MVAS)
India's current MVAS industry has an estimated size of US$ 2.7 billion. The industry
derives its revenues majorly from the top five to six products such as game based
applications, music downloads, etc, which continue to form close to 80 per cent of
VAS revenues. The Indian
MVAS industry estimated to grow to US$ 10.8 billion by 2015, with the next wave of
growth in subscriptions expected to come from semi-urban and rural areas.

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 Mobile Number Portabil ty (MNP)
i
Mobile Number Portability requests increased from 41.88 million subscribers at the
end of March 2012 to 45.89 million at the end of April 2012. In the month of April
2012 alone, 4.01 million requests have been made for MNP.
 Handsets
The mobile handset market's revenues in India will grow from US$ 5.7 billion in 2010
to US$7.8 billion in 2016, according to the study. India is the second largest mobile
handset market in the world and is set to become an even larger market with unit
shipment of 208.4 million in 2016 at a CAGR of 11.8 per cent from 2010 to 2016.

The Indian handset market witnessed a 14.1 per cent growth in 2011 to touch a total
volume of 182 million handsets. The market continues to be dominated by samsung
with a share of 33 per cent, followed by Samsung with 27 per cent, and Micromax
with 14 per cent.
Domestic and Chinese handset makers such as Micromax, G'Five, Karbonn, Spice,
Maxx and Lava, have garnered a strong presence in the Indian market due to their
feature-rich, localized products and low price points

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Future opportunities
3G & WiMax
Auction of spectrum for 3G services with full swing . 3G offers opportunities for new
players to enter the booming Indian telecom market. Better spectral efficiency and
high speed data services are some of the advantages that 3G has to offer. However,
high license fee, handset costs, and low acceptance rate among consumers may
dampen the hype.
WiMax offers high speed data connectivity in a radius of upto 50km. It is attractive
not only for providing broadband access in urban areas but is also touted as a
technology that can bridge the digital divide by providing broadband access in rural
areas without the high costs associated with laying cables.
Major differences between 3G and WiMax:
WiMax offers better spectral efficiency through OFDM and multiple antenna support.
It offers higher peak rate
It offers variable channel bandwidth on uplink and downlink. It also allows for
symmetric uplink and downlink to support T1 services. 3G only supports asymmetric
uplink and downlink.
3G has better mobility support. WiMax mobility is an add on feature and is unproven.

Data Services Will be Next Growth Driver
India Ratings expects that higher adoption of data services will be the next growth
driver for telcos. As the voice market is maturing, telcos will shift their focus on data
services, along with value-added services. As per industry estimates, there were 137

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million internet users and only 23 million internet subscribers in the country at endJune 2012, as per TRAI data. The number of internet users are likely to double over
the next two three years, most of which will be on the mobile platform.

Telcos have invested heavily for acquiring 3G licenses and rolling out a network for
it. But adoption of 3G services has been lower than expected primarily due to the low
penetration of compatible handsets and high cost of data services. However, India
Ratings expects faster adoption of these services in the near term as operators have
slashed 3G usage chargesGrowth and future of VAS
Currently, MVAS in India accounts for 10 per cent of the operator's revenue, which is
expected to reach 18 per cent by 2010. According to a study by Stanford University
and consulting firm BDA, the Indian MVAS is poised to touch US$ 2.74 billion by
2010.Here are many opportunities on m2m, m-banking, m-education, and m-health
There is lack of innovation on the application side
Application providers need to make investment in understanding challenges of
business users and then design solutions
VAS providers should look at holistic solutions
Fortune at the bottom of the pyramid
The Indian rural market is going to be the next big thing for wireless telecom
providers. With the tele-density in rural areas being still about 10 per cent against the
national average of about 21 per cent, there seems to be huge untapped potential for
mobile phone penetration in rural India. The government also plans an investment of
US$ 5 billion, during 20013 to 20015, for the development of around 100,000
community service centres in rural India to provide broadband connectivity.
Additionally, by 2013, the government targets:
 80 million rural connections
 Mobile coverage of 90 per cent geographical area
 Internet Protocol Television (IPTV) in 600 towns

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 Two-fold increase in telecom equipment R&D from the current level of 15 per
cent.

4. Recent partnerships, mergers and acquisitions in India
4.1 Bharti Airtel Qulacomm
Bharti acquires 49% stakes in qualcomm in 2012
4.2 NTT DoCoMo takes stake in Tata Teleservices (2009)
NTT DoCoMo paid 2.7 Billion USD for a 26% stake in Tata Teleservices. The deal
values Tata Teleservices at $10 bn.

4.3 New GSM license holders (As SC cancelled 122 licenses)
In January 2008 the Department of Telecommunications allocated 2G GSM spectrum
for 120 circles to nine applicants—Unitech, Datacom (Videocon), Loop (BPL),
Shyam, Idea, STel, Spice, Swan and Tata Teleservices. This allocation based on a
first-come first-serve basis and the subsequent second-hand deals where some global
major acquired stake in the new allotee companies valuing them much higher than the
license fee sparked major controversy. Currently there is a proposal under discussion
to ban dilution of promoter‘sequity in a company for 3-5 years. The telecom regulator
examining a proposal whether to introduce a lock-in period before the promoters of
telecom firms can sell their equity. DoT‘s intention for proposing this policy was to
prevent fly-by-night promoters from making huge profits by selling their equity,
especially when the Government had given them spectrum at a subsidised price. In
my opinion, the market should be allowed to function rather than exerting external
controls. The question that needs to be asked is that why should the government be
selling spectrum at subsidized prices? Is this not a drain on the exchequer‘s money?
The government should introduce competitive bidding measures so that the spectrum
is sold at the right price.
Swan Telecom – Etisalat (Emirates based Etiasalat paid $900 mn for 45% stake in
Swan Telecom.)

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Unitech Wireless - Norway‘s Telenor (Norway-based telecom operator Telenor has
bought a 60 per cent stake in Unitech Wireless for US$ 1.23 billion.
STel – Bahrain Telcom
(Bahrain Telecommunications Co (Batelco), has signed an agreement to acquire 49%
stake in Chennai based S Tel for $225 Millionxii. S Tel received Unified Access
Services Licences and start-up spectrum in Bihar,Orissa, Jammu & Kashmir,
Himachal Pradesh, North East and Assam and a ‗Category A‘ All-India ISP licence.

4.4 Telecom Infrastructure (Tower) consolidation
Mobile subscriber base is expected to touch 500 million by 2010 for which at least
3.8 lakh more towers arerequired. In a bid to tap this opportunity, telecom players
have demerged their infrastructure into separatetower business to unlock the value by
selling minority stake. Reliance Telecom Infrastructure (RTIL) and
Swan Telecom are in advanced talks for a multi-year infrastructure sharing deal.
RTIL, which has about47,000 towers is the third largest telecoms infrastructure
company after Indus towers (85,000 towers) and
Bharti Infratel.
In 2008, the Indian government allowed Indian telecom companies to share their
active infrastructure, which includes all key electronic components including
antennas, feeder cables, nodes, radio access network, transmission systems and
backhaul, with the exception of radio frequencies. Prior to March, 2008, telcos here
could only share passive infrastructure such as towers, repeaters, shelters and
generators. Swan had earlier signed a infrastructure sharing deal with BSNL to use the
state-owned telco‘s networks on a national basis.
Bharti Infratel , with ownership of 60,000 towers, had sold about 10 per cent stake to
a consortium ofinvestors for about $ 1 billion.
Indus Towers : Three leading GSM operators, Bharti Airtel, Vodafone-Essar and Idea
Cellular, have joined hands to set up an independent tower company called Indus
Towers. It owns 70,000 towers after merging their individual infrastructure assets in
16 telecom circles in India.

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Reliance Communications had sold 5 per cent stake in its tower company for $337
million. It owns 13,000 towers. Tata Teleservices merged its mobile tower company –
Wireless Tata Tele Info Services Ltd (WTTIL) – with Quippo, a tower firm owned by
the SREI Group and Singapore Government. Post merger, Quippo will have 49 per
cent stake in WTTIL while Tata Teleservices will hold the balance. Under the terms
of the deal,
Quippo Telecom will pay Rs 2,400 crore ($ 493 million) to Tata Teleservices and also
transfer its existing telecom infrastructure comprising 5,000 towers to WTTIL. Once
the merger is completed, the company will have 18,000 towers with an enterprise
valuation of $2.6 billion (about Rs 13,000 crore). The merged entity will be managed
by Quippo despite being a minority shareholder. Quippo had also bought out 1,000
towers owned by the Spice Group.
The telecom tower industry, after reporting a robust growth till 2010, is presently
witnessing a slowdown with the telcos curtailing their network rolout plans. The
cancellation of telecom licences in February 2012 has been another setback for the
tower industry, as this is likely to lead to loss of tenancies and

build-up of

receivables.
The tower industry is awaiting clarity on reduction in the limit on foreign direct
investment (FDI) in the sector and the inclusion of tower companies within the
purview of licensing.
Currently, some telcos are even exploring the possibility of divesting their equity
stake in tower companies in order to meet funding requirements

4.5Vodafone acquisition of Hutch
In Feburary 2007, British telecom giant Vodafone has bagged the 67% Hutch
Telecom International (HTIL) stake in Hutch-Essar at an enterprise value of $19.3
billion (approx Rs 86,000 crore). The acquisition provided Vodafone with access to
the lucrative Indian mobile market. The deal has been in the news lately due to the
income tax (I-T) department notice to Vodafone-Essar asking why capital gains tax on
the $11.1 billion deal should not be levied on the company. The same is being

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contested in courts. In December 2008 the Bombay High Court dismissed the petition
by Vodafone International Holdings against the tax bill relating to the purchase.
Vodafone has moved the Supreme Court challenging the Bombay High Court order
upholding a show-cause notice issued by the Income-Tax Department asking the
telecom firm to pay $2 billion post its acquisition of Hutchison‘s stake in Hutchison
Essar.
The order raises cross-border M&A taxation issues that firms need to be aware of.
Vodafone contended that its Netherlands arm had acquired shares in a Cayman
Islands company (which in turn held shares in Vodafone Essar) from Hong Kongbased Hutchison Telecom: and that all the companies being overseas ones, Indian
revenue department had no jurisdiction in the matter. Vodafone ‗s argument that its
international company had merely acquired a Cayman Islands company which in turn
held shares in the
Indian company was not accepted by the court which said it found this argument too
simplistic. It held that Vodafone‘s basic objective appeared to be acquisition of a
business interest in India.

4.6 Tata’s Global Foray
The Tata Group acquired the Government-owned monopoly service provider for
international long distance calling, i.e. Videsh Sanchar Nigam Limited ("VSNL"), in
2002. The Tata-owned VSNL has made two key acquisitions over the years, i.e. Tyco
Global Network in 2005 and Teleglobe in 2006. The Tata Group subsequently rebranded VSNL and other subsidiaries of VSNL (including Teleglobe and Tyco and
Tata Indicom Enterprise Business Unit) under one global brand name – Tata
Communicationsxiv in early 2008.

Tata Communications is now the number one global international wholesale voice
operator and India's largest provider of international long distance, enterprise data and
internet services in India. Tata
Communications‘ international growth strategy was based on pursuing growth
avenues by geographical expansion. The primary drivers for this phase of the growth

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were network and bandwidth capacity building, global market access and most
importantly complete global connectivity without any network gaps on any routes.

Tata Communications started their path towards globalization by acquiring licenses in
Sri Lanka in 2003. Continuing on this path, they created a wholly owned subsidiary in
the US, VSNL America Inc. This helped them in offering Internet protocol-virtual
private network (IP-VPN) solutions, and in adding value to their own operations in
the area of Internet services by facilitating end-to-end management of the
Internetbandwidth from India all the way to the US. Subsequently, they opened
operations in the UK with subsidiaries named VSNL Telecommunications UK and
VSNL UK; then they built presence in Europe through offices in France and
Germany. They also completed a major project connecting India and Singapore by
high bandwidth optical cable with complete ownership.
Tyco Acquisition
Tata Communications‘ largest acquisition till date came in 2004 when they acquired
Tyco Global Network (TGN) for $130 million. This gave the company control over a
60,000 km cable network spread over three continents with a huge bandwidth of 1015 terabytes and substantial control over bandwidth prices. They also beat Reliance in
this acquisition, an important victory over the rival.
Teleglobe acquisition
Continuing on their acquisition spree, Tata Communications acquired Teleglobe
International Holdings, aleading provider of wholesale voice, data, IP and mobile
signaling services, in 2005. This acquisition gavethem Teleglobe‘s global network
access, agreements with leading global voice carriers and an enhancedutilization of
TGN network allowing global scale for voice. The acquisition made VSNL
International one of the largest international mobile, data and voice network. With this
acquisition Tata Communications became the largest provider of submarine cable
bandwidth.
Presence in newer developing markets

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In 2006, Tata Communications acquired a 26% stake in South African telecom
operators SNO and Infraco, who together will control significant chunks of the
telecom infrastructure in South Africa.

In 2008, Tata Communications entered into an agreement with two South African
companies — Eskom and Transnet — to acquire their 30 per cent stake in Neotel, the
second telecom network operator in the Southern African nation. After the completion
of the acquisition Tata Communication along with Tata Africa would have an
effective 56 per cent stake in Neotel.
Recently in 2008, Tata Communications expanded its Global VPN service to China
through an NNI (Network to Network Interface) agreement with China Enterprise
Netcom Corporation, a value-addedtelecommunication services and integrated IT
solutions provider and subsidiary of CITIC (China
International Trust and Investment Corporation), allowing them to serve their many
global and India MNC customers who require a single scalable and reliable global
VPN with deep reach into both India and China, and broad reach around the world.

4.7 Idea Cellular takeover of Spice Telecom
On 25th June 2008 the country's fifth-largest mobile operator in terms of subscribers,
Idea Cellularannounced the acquisition of B K Modi-owned Spice group's 40.8 per
cent stake in Spice Communicationsfor Rs 2,716 crore. Idea acquired the stake at Rs
77.30 a share. The Birla group company, Idea Cellular said it would merge Spice with
itself through a share swap where Spice shareholders would get 49 Idea shares for
every 100 Spice shares held. It will also pay an additional Rs 544-crore as non
compete fee.
Idea Cellular Overview
Idea Cellular, the leading GSM mobile services operator has licenses to operate in all
22 service areas of India with commercial operations in 11 service areas. With a
customer base of over 110 million, Idea Cellular is a part of the US $ 28 billion

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Aditya Birla Group. The group has a market cap in excess of US $ 31.5 billion,
operates in 20 countries, and is anchored by 100,000 employees belonging to 25
nationalities.
Spice Telecom Overview
Spice Telecom is the brand name of Spice Communications Limited, a mobile phone
service provider in India. Spice Telecom was operating in the states of Punjab (India)
and Karnataka i.e., in 2 circles of 23
Telecom Circles of India. Spice Communications Limited was promoted by Dilip
Modi of Modi Wellvest Private Limited, which owned 40.80% of the company.
Telekom Malaysia Berhad owns 39.20% through TMI
India Limited, Mauritius. TMI India Limited is a wholly owned subsidiary of TM's
international investmentholding company TM International Sdn Bhd (TMI).
Spice was incorporated as Modicom Network Private Limited on 28 March 1995 as a
private limitedcompany. Spice subsequently became a deemed public company under
Section 43(1A) of the Companies
Act, 1956 of India with effect from 1 April 1999 and its name was changed to
Modicom Network Limited. Spice assumed its present name via a fresh Certificate of
Incorporation dated 3 December 1999. With the addition of the word ‗Private‘ in
Spice‘s name under Section 43(2A) of the Companies Amendment Act,
2000 of India, Spice‘s name was changed to Spice Communications Private Limited
with effect from 28October 2003. On 28 December 2006, Spice was converted into a
public limited company and assumed its present name

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. MARKET Porter‘s industry analysis
CUSTOMERS
POTENTIAL NEW COMPETITORS

COMPETITORS

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SUPPLIERS

2013

SUBSTITUTES

Economic model of telecom sector
Return on capital: 1. Reducing from 20 % + (pre-telecom opening up ) to current 9 %.
Drops mainly due to competition and also due to -ve profitability of several players
such as MTNL, BSNL and smaller players
Dupont analysis:-. Asset TO fairly stable at 0.7 to 0.8 as this industry requires
constant investment due to high obsolence
2. Continuous slide in margins from 15 % + to < 10%
3. ROA has gone down from 10 % + to below 10 % ( and< 5 % )
4. Debt equity is same 0.4 : 1 . Not too high debt scenario. most financing may be
through equity (12bn debt of airtel ) launched IPO
5. ROE due to margin pressure (dropping price) is also sliding down

Capital intensive?
High capital intensity due to obsolesce as we have to build brand in sector high start
up cost

Margin intensive?
The business low Net margins which are continuously going down due to competition
and new technology introduction is costlier like BWA , LTE

Business model of telecom companies in India

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Bharti, idea Vodafone are the big brands in Indian telecom services india . Bharti
looks nothing like other telecoms. The sector's core competency is branding and
identifying customer pain points. In the U.S., telecoms are classified as a high
technology industry: "Network is their business. They all outsourced network
installation, maintenance, and service through companies like Ericsson and Nokia
Siemens Networks, and chose software companies like IBM to build and manage its
IT systems.

FOREIGN DIRECT INVESTMENT
India‟ s foreign investment regime is governed by the Foreign Direct Investment
(―FDI‖) policy. As per the FDI policy, there are certain sectors wherein 100% FDI is
allowed (such as software development), whereas there are certain sectors wherein no
FDI is allowed at all (such as gambling). Further, there are certain sectors where FDI
is allowed with certain sectoral caps (such as telecom). Furthermore some investments
can be made under the automatic route (i.e. without any government approval) whilst
others require prior approval of the government. The Department of Industrial Policy
& Promotion (―DIPP‖) is responsible for formulation and implementation of
promotional and developmental measures for growth of the industrial sector, keeping
in view the national priorities and socio-economic objectives.

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The telecom sector in India has always been a sensitive and regulated sector and the
government has been wary of allowing foreign participation. However the outlook of
the government and the industry is fast changing. For the longest time, the intention of
the government was that the majority of the shares of a telecom licensee company
should be held by Indian shareholders; as a result foreign companies and investors
were only allowed to hold up to 74 % of the equity of a telecom licensee.

Source:- planning commission

Foreign Investment can be direct or indirect.
Direct foreign investment means investing directly into the investee (licensee)
company; and Indirect foreign investment means foreign investment in the
company/companies holding shares of the investee (licensee) company and their
holding company/companies or legal entity (such as mutual funds, trusts, etc).

Down Stream Investments
The government has also introduced guidelines for downstream investment by
Investing Indian Companies „owned or controlled by non-resident entities‟ which
states that if FDI is provided to a company (―Investing Company‖) „owned‟ or
„controlled‟ by non-resident entities, any downstream investment made by such

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Investing Company would require FIPB approval, irrespective of the amount of
investment. The intention of the government is very clear that they want to control the
activities of foreign owned or controlled investment holding companies in India and
their downstream investments

5. MERGERS AND ACQUISITIONS
A general term used to refer to the consolidation of companies. A merger is a
combination of two companies to form a new company, while an acquisition is the
purchase of onecompany company by another in which no new company is formed.
Currently, Merger & Acquisitions (M&As) have become very popular over the years
especially during the last two decades owing to rapid changes that have taken place in
the business environment. Meticulous pre-merger planning including conducting
proper due diligence, committed and competent leadership, speed with which the
integration plan is integrated all this pave for the success of M&As. The Telecom
industry is one such field which offers ample opportunity for an M&A. India, as one
of the fastest growing economies in the world has been on the forefront when it comes
to M&A in the Telecom industry.
There is an upward trend in the mergers and acquisitions in the Telecom Sector that
are happening throughout the world. The aim behind such mergers is to attain
competitive benefits in the telecommunications industry. Foreign investors and
telecom majors look at India as one of the fastest growing telecom markets in the
world. Sweeping reforms introduced & well supported by the Government over the
last decade have dramatically changed the face of the telecommunication industry.
The mobile sector has achieved a tele-density of 64% by FEB 2013 which has been
aided by a bouquet of factors like aggressive foreign investment, regulatory support,
competitive tariffs and falling network cost and handset prices.Both transnational and
domestic telecommunications services providers are keen to try merger and
acquisition options because this will help them in many ways. They can explore new
markets, cut down on their expenses, achieve greater market share and accomplish
market control

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Over the last few years, a phenomenal growth has been witnessed taking place in
Telecom industry. Private sector investment & FDI have also boosted the growth of
M&A in India. Following are the benefits provided in the Telecom industry
 Good Infrastructure
 Error free network
 Higher operating profit margin
 Acquisition of geographical territory
 Easier licensing options
 Access to products & services

M&A OVERVIEW ASIA PECIFIC

Source :-MergerMarket M&A Round-up for H1 2012

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Source :- Merger market 2012
Main strategic reasons for acquisitions — Answer from telecom operators

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M&A In Indian Telecom Sector

With the liberalization of the Indian economy, the telecom sector has become very
attractive for mergers and acquisitions. Some of the big deals that have taken place in
the Indian telecom include the following:
 Bharti acquires 49% stakes in qualcomm in 2012
 SingTel increasing its stake in Bharti telecom from 26.96 % to 32.8 % in 2011
 Bharti aquires zain telecom
 Reliance industries acquires infotel broadband 2010
 Providence‟ s investment into Aditya Birla Telecom in 2009
 Vodafone taking over Hutchison-Essar in 2007
 Malaysia Telekom's 49% stake in Spice Telecom
 Temasek Holdings' 9.9% stake in Tata Teleservices through its wholly-owned
subsidiary Aranda Investments Mauritius

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5.2M&A TRENDS In Indian Telecom Companies
&IMPACTS
5.2.1Bharti airtel – zain telecom
Bharti Airtel Limited (―Bharti Airtel‖) bags the „big ticket‟ to begin its much
awaited African Safari.
The highly ambitious, Indian entrepreneur, Mr. Sunil Bharti Mittal had always looked
at Africa as the venue for the next round of technology and telecom revolution and
had never concealed his intent to be a part of African business history. Bharti Airtel
was determined to find its way into Africa, but the crucial question was who would
be the indigenous partner? The two rounds of extremely arduous negotiations with
MTN Group Limited (―MTN‖) could not bring any success for Bharti Airtel.
However, the failure to woo MTN did not dampen the spirits of Bharti Airtel or dilute
its ambitions. The writing on the wall was clear; choosing another African partner was
only a matter of time

Source :- Annual Report(in million Rs)
On February 15, 2010, Bharti Airtel announced that it had entered into exclusive
discussions with Mobile

Telecommunications Company KSC (―Zain‖) for the

acquisition of Zain Africa International BV (―Zain Africa‖) and thereby the entire
African operations of Zain, excluding the operations in Sudan and Morocco. With
bitter experience to haunt, Bharti Airtel strategically played it safe this time and made

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an offer to Zain which it just could not refuse. For a commercially ailing Zain, Bharti
Airtel‟ s offer of USD 10.7 billion was a jackpot.

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The structure adopted by Bharti Airtel for acquisition of Zain Africa is conducive
from a tax perspective specifically with respect to repatriation of profits from Zain
Africa to Bharti Airtel.Under the domestic tax laws of Netherlands, no taxes are
levied on dividends distributed between two Netherlands resident companies, subject
to compliance with the applicable participation exemption conditions. Thus, it should
provide for a tax free transfer of profits from Zain Africa to Bharti Airtel Netherlands
BV

Market reacted on merger & post merger market situation

Source : bloomberg

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5.2.2 Idea cellular- spice deal overview
Idea Cellular, the leading GSM mobile services operator has licenses to operate in all
22 service areas of India with commercial operations in 11 service areas. With a
customer base of over 110 million Idea is listed on the National Stock Exchange
(NSE) and the Bombay Stock Exchange (BSE) in India.
Idea Cellular is a part of the US $ 61 billion Aditya Birla Group. The group has a
market cap in excess of US $65 billion, operates in 20 countries, and is anchored by
100,000 employees belonging to 25 nationalities.
On 25th June 2008 the country's fifth-largest mobile operator in terms of subscribers,
Idea Cellular announced the acquisition of B K Modi-owned Spice group's 40.8 per
cent stake in Spice Communications for Rs 2,716 crore. Idea acquired the stake at Rs
77.30 a share. The Birla group company, Idea Cellular said it would merge Spice with
itself through a share swap where Spice shareholders would get 49 Idea shares for
every 100 Spice shares held. It will also pay an additional Rs 544-crore as non
compete fee
Spice Telecom Overview
Spice Telecom is the brand name of Spice Communications Limited, a mobile phone
service provider in India. Spice Telecom was operating in the states of Punjab (India)
and Karnataka i.e., in 2 circles of 23 Telecom Circles of India. Spice Communications
Limited was promoted by Dilip Modi of Modi Wellvest
Private Limited, which owned 40.80% of the company. Telekom Malaysia Berhad
owns 39.20% through TMI India Limited, Mauritius. TMI India Limited is a wholly
owned subsidiary of TM's international investment holding company TM
International Sdn Bhd (TMI).Spice Telecom is the brand name of Spice
Communications Limited, a mobile phone service provider in India. Spice Telecom
was operating in the states of Punjab (India) and Karnataka i.e., in 2 circles of
23Telecom Circles of India. Spice Communications Limited was promoted by Dilip
Modi of Modi Well vest Private Limited, which owned 40.80% of the company.
Telekom Malaysia Berhad owns 39.20% through TMI

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India Limited, Mauritius. TMI India Limited is a wholly owned subsidiary of TM's
international investment holding company TM International Sdn Bhd (TMI).
Spice was incorporated as Modicom Network Private Limited on 28 March 1995 as a
private limited company.


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The Spice Communications have been looking for a quick exit since the telecom
tribunal rejected the company‘s plea for a panIndia licence. Increased competition led
to deterioration of Spice‘s finances. Its Net Profit fell from 69.70Mn in FY2005 to a
loss of (525Mn) by Dec 2007.
The Aditya Vikram Birla group-controlled Idea Cellular acquired BK Modi‘s 40.8%
stake in Spice Communications for around Rs 2200cr. The deal finalized between Rs
77 and Rs 78 per share.
After buying out the Modis, Idea Cellular provided open offer for 20% stake in Spice
that held by the public. The two companies will be subsequently merged. Telekom
Malaysia, which had a 39.3% stake in Spice Communications, got a proportional
stake in the combined entity.

The deal gave Idea strategic advantage, since Spice holds spectrum in the highly
efficient 900 Mhz, which can accommodate a large number of subscribers. If Idea
were to launch operations independently in Karnataka and Punjab (the two circles
where Spice operates now), it only get radio frequencies in the 1800 MHz band, as the
900 MHz has been exhausted.
The deal result in Idea Cellular moving ahead of Tata Teleservices to become the
country‘s fifth-largest mobile service provider.
Market reacted on merger & post merger market situation

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Source :- Bloomberg
5.2.3Vodafone - hutch deal
Huchison-telecommunication-(Pre-Merger)


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In the year when Vodafone in net losses acquired stakes in Hutchison turnaround
Vodafone .vodafone India is his most profitable entity in last 4 quarters

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6 .Financial performance
The financial performance of the 5 acquiring firms before and after the announcement
of M & A have been analyzed with the help of various financial ratios.
Analysis of Financial Performance of Telecom Companies in India

Test of Hypothesis –1
In order to test the validity of the null hypothesis, ―The merged telecom companies
did not achieve better liquidity, better solvency and improve profitability after the
merger‖, the following parameters have been selected to test the results of pre and
post merger periods

6.1Return on NetWorth (RONW)

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Major observations in Table:This ratio highlights managements ablity to generate a meaningful return on capital
invested in the business
As profit shrinking every year . only company seen unaffected is VODAFONE due
to good growth aspects. Tata communication seen worst affected due to start up
companies
RONW of All other operators are decreasing year on year

6.2 Earning Per Share (EPS)

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Telecom Services sector has the lowest percentage earnings
Impact of NTP 2011 on earning NTP clauses such as one-time excess spectrum
charges, charges on spectrum renewal (net present value of the impact), changes
in roaming regulations, a five-paise reduction in termination charges and a 8
percent license fee for tower companies.

Major observations :Idea & Vodafone only two companies successful in sustaining income
.MNP(mobile number portability ) helped idea to increase its subscriber base.
Reliance communication & Tata communication worst with respect to earning
Tata communication losses widen in last quarter . telecom companies are trying
to back on track by increasing tariff . idea cellular, Bharti airtel already increased
their tariff

II. Liquidity parameters
6.3 Current Ratio

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Liquidity ratios measure the short term solvency i.e. the firm‘s ability to pay off
current dues. In the present study current ratio is used to check the liquidity of the
firm
It is also called ‗working capital ratio‘. It expresses the relationship between current
assets and current liabilities. A higher current ratio shows that the manufacturing
company is able to pay its debts maturing within a year. From the management point
of view, a higher current ratio is an indication of poor planning since an extensive
amount of funds would lie idle.

In a sound telecom business, a current ratio of 1.5:1 is considered an ideal one. A very
high ratio will result in idleness of funds and therefore, is not a good sign. On the
contrary, a low ratio would mean inadequacy of working capital.
Major observations in Table :
Tata communication Only one company which has ratio more then industry . as more
assets idle impacted on tata‘s earning .
Airtel ratio down due to its aqusition (zain) and due to high 3G spectram price that
increased liabilities in operator balance sheet

III. Solvency parameters

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6.4 Debt-Equity ratio
Major observations in Table

Most telecom companies have significant amount of debts to their Balance sheets. Debt
to Equity ratio for leading Telco is increasing. Bharti debt which will now be almost
Rs.1.5 for a Rupee of Equity. Obviously this skewed ratio is also because of purchase of
Zain’s Africa assets, but not only because of this.
In case of Idea its debt to equity ratio will go from 0.67 to 0.96 in just years’ time.
Reliance Communications Balance sheet is already highly stressed and has not improved
after paying the 3G spectrum amount. Same applies to all 3G spectrum winners.

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IV. Overall efficiency parameters
6.5 Profit before tax (PBT)
The main objective of business is to earn profit. Therefore, efficiency in business is
measured by profitability. Thus, a measure of profitability is the overall measure of
efficiency. To check the overall efficiency of the merging cases, profit before tax,
profit after tax and profit before tax to total income are calculated.

Major observations in Table:PBT of Bharti Airtel grew significantly from 2008 to 2010 at CAGR of approx.
21%and declined there afterwards by almost 10% each year due to high debt and poor
revenue reliazation from its acquisition of zain .
Vodafone‘s profits grew substantially from 09 to 12 due to growth in its customer
base
Likewise all other operators declined in profit before tax due interest rates

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In year 2008 Indian Telecom Industry Manufactured 250 Billion minutes. Currently it is
manufacturing 600 Billion.In year 2008 it sold each minute for 60 Paise today it sells it
for about 35 paise.
The running cost of Manufacturing this minutes without taking sunk cost into account is
stuck at around 25 paise per minute.Above stated is the case of Airtel, which has the
lowest cost, because of its completely outsourced Business model. For rest it is even
higher.

Net profit of telecom companies increased y-o-y only in case of tata Communication
losses are increasing y-o-y . profits had been affected due to regulatory changes
leading to higher license fee rates, such as India's department of telecommunications'
Wireless Planning and Coordination (WPC) wing's WiMax charges, along with a onetime actuarial loss on Canada's pension fund.

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7. Valuations drivers of telecom industry

The purpose of my analysis is to identify the key valuation drivers for telecom
operators, and to consider the impact of their activities (size, exposure to emerging
markets
Valuations are about projections of future cash flows discounted to their present
value. Earlier, the subscriber base was the key determinant of valuation since
EBITDA figures of most players were largely in the negative

The main valuation criteria used by investors in the telecommunications industry
EV/Sales
EV/EBITDA
Price Earnings Ratio (P/E)
Price-to-Book (P/B)
Beta coefficient (ß)
Telecom specific ratios & key performer indicators
ARPU*
EV/Number of subscribers
EV/Line installed
SAC*

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SRC*
Large telcos that operate in emerging markets have higher valuation multiples than
their peers in mature markets. Investors place a premium on growth prospects, so long
as they are well monitored and diversified.
EV/EBITDA
The greater the exposure to emerging markets, the higher the EV/EBITDA multiple,
provided the operator is large enough
EV/EBITDA multiples of larger emerging operators by geographical exposure

Key performer Indiactor
ARPU
The Indian telecom industry is highly competitive with at least seven telcos in each
circle and up to 12 telcos in some circles competing for market share. This makes
India one of the most crowded mobile markets globally—the number of telcos in most
countries ranges from two to five—and has led to aggressive pricing by telcos during
the last two years. The impact of such pricing strategies is reflected in the trend of
decline in the industry‘s key operating metrices: Average Revenue per User (ARPU);
and Average Rate per Minute (RPM)

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Source: - Bloomerg

Interesting part is all the leverages coming to Telco‘s are at a time when there revenues
are steadily declining Quarter on Quarter (QoQ). Indian Telecom Operators says they are
in Business of ―Manufacturing Minutes‖ and it will increase as more and more operators
launch their services that have been granted license to provide Unified Access Service
(UAS) to consumers.

‘Minute’ Statistics:
Quick recap – In year 2008 Indian Telecom Industry Manufactured 250 Billion minutes.
Currently it is manufacturing 600 Billion.In year 2008 it sold each minute for 60 Paise
today it sells it for about 35 paise.The running cost of Manufacturing this minutes without
taking sunk cost into account is stuck at around 25 paise per minute.Above stated is the
case of Airtel, which has the lowest cost, because of its completely outsourced Business
model. For rest it is even higher.
In coming months there will be much ‗free cash‘ flowing out of the balance sheet to battle
in the market for all the operators and here Bharti is also no exception.
What is changing Business Dynamics?
All 4 parameters which define the Industry have turned adverse now:
1. Customers
2. Competitiveness
3. Regulations
4. Raw Materials
Population (Potential Customers) was one the biggest pain reliever for Telecom
Company, but now customers have changed behaving like they use to a decade ago. One
cant even blame them, as telecom

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Asset valuation methodologies for the telecommunications industry
All the acquired assets and assumed liabilities should be recorded at fair value, and
their sum compared with the price paid by the acquirer.
According to IFRS 3/3R (Business Combinations) and FAS 141/141R (Business
Combinations), the fair value is defined as ―the amount for which an asset could be
exchanged or a liability settled, between knowledgeable, willing parties in an arm‘s
length transaction.‖
In addition, standards specify that fair value should reflect market expectationsabout
the probability that the future economic benefits associated with the asset will flow to
the acquirer. Therefore, any analysis should reflect assumptions which would be
common to any market participant if it were to buy or sell each asset on an individual
basis. Thus, the fair value should be determined with reference to market participants
in general, but exclude synergistic values that are unique to a particular buyer.
The following methodologies are commonly used to value intangible assets:
• Income approach which allows future economic benefits of the asset to be captured
(via the multi-period excess earnings method, relief from royalty method, build-out or
greenfield method)
• Market approach based on comparing the asset with similar assets, and prices paid
for them (comparable transactions method)
• Cost approach relying on the principle that no prudent investor would pay for an
asset more than the cost to recreate it or to reproduce an asset of similar utility
(replacement or reproduction cost method) More than one approach may need to be
considered in order to arrive at supportable valuation range. In the following sections,
we explain the choice of the preferred method for each asset valued, and discuss some
of the practical challenges.

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7.1Bharti Airtel – Zain deal
Bharti Airtel is paying Zain an enterprise value of USD 10.7 billion10 which is 10
times the enterprise value (―EV‖) to Earnings Before Interest, Taxes, Depreciation
and Amortization (―EBIDTA‖) multiple for Zain.
Out of the total acquisition price, USD 8.3 billion will be paid in cash within three
months from the date of closing and USD 700 million will be paid after one year from
the date of closing.Further, Bharti Airtelassume debt to the tune of USD 1.7 billion on
the books of Zain Africa.
Airtel itself is available at 7.2 times EV to EBITDA. Even if significant EBITDA
growth of 20-22% for the next two years is factored in, the deal would still be
upwards of 6 times to 6.5 times on EV/EBITDA multiples. This would make it
amongst the most expensive emerging market telecom players on figures after two
years.
The deal is highly volatile and carries huge commercial risk for Bharti Airtel. To
acquire a financially sinking company, Bharti Airtel has incurred exceedingly
expensive loan worth USD 8.3 billion at an interest rate of 195 basis points over
LIBOR. The loan would be a drag on Bharti Airtel's earnings with no immediate
returns expected from the loss-making target.
Bharti Airtel Limited is rated second in current valuation category among related companies.
After

adjusting

for

long-term

liabilities, total

market

size of Wireless

Communications industry is currently estimated at about5.74 Trillion. Bharti totals
roughly 1.81 Trillion in current valuation claiming about 32% of Wireless Communications
industry.

Valuation
YEAR
Revenue(Rs mn)
EBITDA(Rs mn)
EBITDA Margins
PAT(Rs mn)
EPS (Rs)
RoE
RoCE
P/E
EV/EBITDA

Idea
Bharti Airtel
FY13E
FY14E
FY13E2
FY14E3
226732
249397
803486
872345
59442
66828
243959
275178
26.20%
26.80%
30.40%
31.50%
10159
15073
34848
51312
3.07
4.56
9.2
13.5
7.50%
10.20%
6.30%
8.60%
9.90%
11.80%
7.80%
9.50%
24.1
16.2
27
18.3
5.9
4.9
6.3
5.3

7.2Idea cellular

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The acquisition of Spice Communications by Idea Cellular at Rs77.3 per share
implying a valuation of 18x EV/EBIDTA looks expensive at the time of buyout.
However considering the entire deal structure involving preferential allotment to TMI
and the share swap, the deal turns out to be valuation neutral at the same time
enabling Idea raise funds for future expansion. Idea bought Spice group‘s 40.8%
stake in Spice Communications
As market consider deal as over valuation of spice by idea However, it should be
noted that in such deals, there is typically an acquisition premium involved and often,
valuation ratios like P/E or EV/EBITDA take a backseat in light of the longer-term
quantitative, qualitative and strategic benefits involved. We believe Idea in the longterm will benefit in several ways from the deal and it should be looked at from that
perspective.
Idea has delivered better than expected EBITDA in highly competitive environment,
led by cost controls. However, regulatory payouts in near term would be significantly
higher than FCF generation. estimated FCF of Rs56bn over next 2 years but
regulatory pay out towards one-time spectrum charge, spectrum renewals, bidding for
7 cancelled
circles and spectrum re-farming would be significantly high. Further, re-farming
would
have significant negative impact on opex as well.

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Based on recorded statements Idea Cellular Limited has Operating Margin of 10.55%. This is
174.3% lower than that of Technology sector, and 270.44% lower than that of Wireless
Communicationsindustry, The Operating Margin for all stocks is 397.18% lower than the firm.

7.3Vodafone hutch deal:In October 2005, Vodafone picked up a 10 per cent stake in Bharti Airtel for $1.5
billion (then Rs 6,750 crore)
52 per cent buyout of Hutchison Essar for $10.9-billion (Rs 44,690 crore) last year,
that valued the company at $21 billion (Rs 86,100 crore)
Price to Sales ratio shows how much market values every dollar of the company's sales.

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Vodafone Group Public Limited Company is rated fourth in market capitalization
category

among

related

companies. Market

capitalization of Wireless

Communications industry is at this time estimated at about 5.59 Trillion. Vodafone
claims roughly 80.21 Billion in market capitalization contributing just under 2% to
Wireless Communications industry.

8. Regulatory Environment Impact
Cancellation of Licenses Lead to Consolidation
In February 2012, the SC cancelled 122 2G licenses which it awarded 2008 onwards.
This ruling mainly affected new entrants; however some of the licenses of older
operators were also cancelled. After the cancellation, some of the operators – Loop
Telecom Private Limited,
Etisalat DB Telecom Pvt. Ltd. and S Tel Ltd. – decided to exit the market and are
winding up operations. Two other majorly affected operators – Unitech Wireless
Limited and Videocon Telecommunications Ltd. – are continuing their operations but

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at a smaller scale after winning back some of the cancelled licenses in November
2012 in a re-auction that received muted response. Sistema Shyam Teleservices Ltd
still is waiting for verdict on curative petition filed in the SC before deciding its
course of action.

The Indian telecom sector is one of the most competitive sectors in the world and
consolidation due to license cancellation should offer some respite to the operators
who are struggling due to declining call rates. However, India Ratings does not expect
any significant reduction in competition from here in the short term, as most of the
operators are either large pan-India operators or small regional players.
Room for Tariff Hikes
Call rates in India are among the cheapest in the world with ARPM of INR0.48. Over
the last few years, call rates have declined sharply, before stabilising recently, as
operators were trying to add subscribers at the cost of profitability. India Ratings
expects that this trend will now reverse. This is because operators are capitalising on
reduced competitive intensity due to license cancellation by raising tariffs; also, there
is a high likelihood of passing of incremental regulatory expenses in part or fully to
customers. Furthermore, there is limited scope for new subscriber-led revenue growth
from here on. However, a rise in tariffs may negatively impact minutes of usage.

Regulatory Developments
High Reserve Price and Muted Response in Auctions
The Indian government held auctions for cancelled 2G spectrum in November 2012,
which received a muted response from bidders mainly due to the high reserve price
for auction.

The reserve price was set at INR28bn per MHz for 1800MHz telecom spectrum (used
by GSM operators) and INR36.4bn per MHz (1.3xfor 1800MHz spectrum base price)
for 800MHz spectrum (used by CDMA operators), both for pan-India spectrums.

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There was no pan-India bidder for the 1800MHz spectrum and there was no bidder at
all for the 800MHz spectrum. As a result, the government was able to raise just
INR94bn from this sale, compared with the target of over INR400bn. There was no
bidding in four circles, including key circles Delhi and Mumbai.
In response to the muted response, the government has cut spectrum reserve prices in
these four circles by 30%, bringing it down to INR24bn per MHz for a pan-India
spectrum. The industry considers that the revised base prices are still high and
operators will have limited interest in the auction. However, the government has cut
reserve price of the 800MHz spectrum by a steep 50% to INR18.2bn per MHz for a
pan-India spectrum, thus making it cheaper than the 1800MHz spectrum.
A fresh auction is likely to take place in March 2013, to sell unsold spectrum and also
to auction the 900MHz spectrum in Delhi, Mumbai and Kolkata, which is currently
used by incumbent operators.

Staggered Payment Mechanism Positive
Positively, the government has given an option of staggered payments mechanism,
wherein GSM and CDMA operators can pay 33% and 25% of the spectrum charges
up-front, respectively, and the rest in 10 annual instalments (with interest) following a
two-year moratorium period. Therefore, telcos will not face an immediate cash
outflow for the purchase of spectrum, thus reducing impact on their credit profile.
Operators have also been allowed to mortgage spectrum to raise bank loans.

Liberalised Use of Spectrum
The government has also decided to liberalise the use of auctioned spectrum thus
providing the licensee an option to deploy new technologies. This will be positive for
the industry as operators will now be able to offer both voice and high speed data
services on the same
spectrum using efficient technology

Spectrum Re-Farming

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To create a level playing field among various operators, the government has decided
to re-farm the more efficient 900MHz spectrum, used by older operators, with
1800MHz. Operators will have to participate in a bidding process in case they choose
to retain 2.5MHz of the 900MHz spectrum. The remaining spectrum will be replaced
with the 1800MHz spectrum at an auction determined price. Operators will also need
to invest heavily in upgrading network infrastructure to match service quality with the
1800MHz spectrum.

One-Time Fees on Excess Spectrum
The government has also decided to impose a one-time fee on operators that hold a
spectrum above contractual spectrum of 4.4MHz in case of GSM and 2.5MHz in case
of CDMA. There will be two components of this fee. GSM and CDMA operators will
have to pay a prospective charge on holding spectrum above 4.4MHz and 2.5MHz,
respectively, which will be linked to auction determined prices. The other component
will be a retrospective charge on spectrum above 6.2MHz, held with GSM operators
for the July 2008 to December 2012 period, which will be calculated by indexing of
the 2001 spectrum allocation price to the prime lending rate of State Bank of India.
The one-time fee on excess spectrum could result in a significant cash outflow for the
affected operators. However, for this payment also, operators have an option of
making a partial upfront payment and the remaining in the form of interest bearing
loans. The operators who do not want to pay the one-time fees may surrender the
excess spectrum.

Abolition of Roaming Charges
The government plans to abolish roaming charges in 2013, which contributes about
8% to revenue for telcos. Any such move will negatively impact revenue and
profitability of operators and they may respond with tariff hikes. India Ratings
expects delays in implementation of this plan as the government needs to fine tune the
recommendation before it is implemented.

Impact of Regulatory Developments

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While some regulatory developments will have a uniform impact on all the operators,
others will have a different degree on impact on different operators. A high reserve
price will be negative for all operators, whereas a staggered payment mechanism and
liberalised use of spectrum will be positive for all operators. In case of spectrum refarming and one-time fees, India Ratings does not expect a positive impact on
operators

Government Initiatives
The Government intends to make India a teleport hub, enabling it to become an uplinking/down-linking centre, just like Hong Kong and Singapore. The Ministry of
Information and Broadcasting (I&B), in consultation with the industry, will explore
modalities, challenges and finalise the road map for the same. The initiative is
expected to facilitate foreign investments, better technology and sustainable

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M&A Trends and Financial Performance of Telecom Companies during Pre& Post Merger

M&A Trends and Financial Performance of Telecom Companies during Pre& Post Merger

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