M&A Trends in the Indian Telecom Sector · M&A Trends in Indian Telecom Sector Tanmay Gupta Page 3...
Transcript of M&A Trends in the Indian Telecom Sector · M&A Trends in Indian Telecom Sector Tanmay Gupta Page 3...
PGPX-2009
Individual Research Project (IRP)
M&A Trends in the Indian Telecom Sector
Report by Tanmay Gupta (PGPX 2009)
IRP Guide: Prof. Rekha Jain
- 1 -
Table of Contents
EXECUTIVE SUMMARY ....................................................................................................................................................... 3
1 INTRODUCTION ......................................................................................................................................................... 4
2 SECTOR OVERVIEW ................................................................................................................................................... 4
2.1 REGULATORY ENVIRONMENT .................................................................................................................................... 4
2.2 KEY PLAYERS ....................................................................................................................................................... 10
2.3 RECENT TRENDS ................................................................................................................................................... 13
2.4 FUTURE OPPORTUNITIES ........................................................................................................................................ 16
3 RECENT PARTNERSHIPS, MERGERS AND ACQUISITIONS ....................................................................................... 17
3.1 NTT DOCOMO TAKES STAKE IN TATA TELESERVICES ................................................................................................... 17
3.2 NEW GSM LICENSE HOLDERS ................................................................................................................................. 17
3.3 TELECOM INFRASTRUCTURE (TOWER) CONSOLIDATION ................................................................................................ 18
3.4 VODAFONE ACQUISITION OF HUTCH ........................................................................................................................ 19
3.5 TATA’S GLOBAL FORAY .......................................................................................................................................... 20
Tyco Acquisition ....................................................................................................................................................... 21
Teleglobe acquisition ............................................................................................................................................... 21
Presence in newer developing markets .................................................................................................................... 21
4 IDEA CELLULAR TAKEOVER OF SPICE TELECOM...................................................................................................... 22
4.1 IDEA CELLULAR OVERVIEW ..................................................................................................................................... 22
4.2 SPICE TELECOM OVERVIEW .................................................................................................................................... 23
4.3 TM INTERNATIONAL OVERVIEW .............................................................................................................................. 23
4.4 SYNERGIES ANTICIPATED........................................................................................................................................ 24
4.5 CURRENT STATUS ................................................................................................................................................. 25
4.6 DEAL STRUCTURE ................................................................................................................................................. 26
4.6.1 Planned Merger .......................................................................................................................................... 26
4.6.2 20% open offer ............................................................................................................................................ 27
4.6.3 Non-Compete fee ........................................................................................................................................ 27
4.6.4 Valuation..................................................................................................................................................... 28
4.7 SUMMARY .......................................................................................................................................................... 28
5 RELIANCE MTN MERGER FAILURE .......................................................................................................................... 29
5.1 MTN GROUP ...................................................................................................................................................... 29
5.2 RELIANCE COMMUNICATIONS ................................................................................................................................. 29
M&A Trends in Indian Telecom Sector
Tanmay Gupta Page 2
5.3 BHARTI IN FORAY FOR MTN ................................................................................................................................... 30
5.4 BHARTI BACKS OUT: PREDATOR OR PREY? ................................................................................................................. 30
5.5 RELIANCE IN TALKS WITH MTN: EXCLUSIVE NEGOTIATIONS .......................................................................................... 31
5.6 THE FAILURE: SIBLING RIVALRY ............................................................................................................................... 32
5.7 SUMMARY .......................................................................................................................................................... 33
6 CONCLUSION AND M&A OUTLOOK ........................................................................................................................ 33
7 EXHIBITS .................................................................................................................................................................. 36
7.1 SPICE COMMUNICATIONS EQUITY HOLDING DETAILS ..................................................................................... 36
7.2 SPICE COMMUNICATIONS AUDITED FINANCE RESULTS SUMMARY ................................................................. 38
7.3 IDEA CELLULAR EQUITY HOLDING DETAILS ................................................................................................... 39
7.4 IDEA CELLULAR AUDITED FINANCE RESULTS SUMMARY................................................................................ 41
8 ENDNOTES ............................................................................................................................................................... 41
M&A Trends in Indian Telecom Sector
Tanmay Gupta Page 3
Executive Summary
Indian telecom industry is the second fastest growing telecom market in the world after China. The overall
tele-density India has reached 34.50 % at the end of January 2009. 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 two specific events, namely, Idea Cellular takeover of Spice
Telecom and Reliance MTN merger failure. 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.
This will result in partnerships joint ventures and equity sellout to foreign players.
• New license holders will continue to look to sell their stake at a premium. New policies will seek to
curb this license arbitrage.
• 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 startup cost by infrastructure sharing.
• 3G and WiMax license auctions will spur M&A and partnership activity.
M&A Trends in Indian Telecom Sector
Tanmay Gupta Page 4
1 Introduction
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 two deals
in the industry to gain deeper understanding of the M&A nuances in this industry:
• Idea Cellular takeover of Spice Telecom: I have selected this as it is one of the biggest deals that
happened in Telecom this year. It is a deal that will throw light on the consolidation trends in the
Indian Telecom industry.
• Reliance MTN merger failure: Reliance MTN merger saga is an externally focused merger deal and
involves two major Indian telecom operators Bharti and Reliance at different points of time.
Studying the drivers in this deal will help me understand the global expansion trends in the Indian
Telecom industry.
The above two deals will provide me with deeper understanding of both consolidation and global expansion
trends in this industry.
2 Sector Overview
2.1 Regulatory environment
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 initiatives
included Addendum to NTP -1999, Broadband Policy 2004, Amendment to Broadband Policy 2004 etci.
The opening of the sector has not only lead to rapid growth but also helped a great deal towards
maximization of consumer benefits. The tariffs have been falling continuously across the board as result of
healthy and unrestricted competition.
M&A Trends in Indian Telecom Sector
Tanmay Gupta Page 5
The Telecom Commission and the Department of Telecommunications are responsible for policy
formulation, licensing, wireless spectrum management, administrative monitoring of PSUs, research and
development and standardization/validation of equipment etc.
Telecom Regulatory Authority of India (TRAI), is an independent regulatory Authority under the Telecom
Regulatory 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 the
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 not
binding on the Central Government.
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 circuits
are to be provided by service providers;
• maintaining a register of inter-connect agreements;
M&A Trends in Indian Telecom Sector
Tanmay Gupta Page 6
• 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.
The process of deregulation of Indian Telecom sector is summarized in the figure belowii.
Source: IBEF
M&A in Telecom sector is guided by many different regulatory bodies. These are summarized in the figure
below.
Pre-reform Partial Deregulation Further Deregulation
Pre-1994 1994-1999 1999 - 2002
• MTNL - Mumbai and Delhi; DTS elsewhere
• No mobile service
• NLD - DoT per/ BSNL ILD -
• 4 private fixed service providers with less than 1% market share
• 2 GSM mobile players in each circle
• 13 players start
• Licenses converted to revenue sharing
• Private sector share less than 5% in revenue terms
• Competition in NLD and ILD
• Licenses on Revenue share
• 4 mobile operators / circle • NTP 1999 • BSNL formed 2001
• Internet Telephony 2002 • FDI - 49 %
• National Telecom Policy (NTP) 1994
• TRAI constituted 1997
• Calling Party Pays
• CDMA launch
• 3-6 operators in each circle
• Intra-circle merger guidelines
• Unified Licensing
Take-off
2002 onwards
• Broadband policy 2004
• FDI - 74% 2005 National Telecom
Policy, 1994
New Telecom
Policy, 1999
Unified Licensing
M&A Trends in Indian Telecom Sector
Tanmay Gupta Page 7
Regulations for M&A in the Telecom Sector are covered belowiii:
DoT guidelines on merger of licenses in Feb 2004 are based on TRAI recommendations. These include
• Prior approval of the Department of Telecommunications will be necessary for merger of the
license.
• There should be minimum 3 operators in a service area for that service, consequent upon such
merger.
• Any merger, acquisition or restructuring, leading to a monopoly market situation in the given
service area, shall not be permitted. Monopoly market situation is defined as market share of 67%
or above of total subscriber base within a given service area, as on the last day of previous month.
For this purpose, the market will be classified as fixed and mobile separately. The category of fixed
subscribers shall include wire-line subscribers and fixed wireless subscribers.
• Consequent upon the merger of licences, the merged entity shall be entitled to the total amount of
spectrum held by the merging entities, subject to the condition that after merger, the amount of
spectrum shall not exceed 15 MHz per operator per service area for Metros and category ‘A’ service
areas, and 12.4 MHz per operator per service area in category ‘B’ and category ‘C’ service areas.
• In case the merged entity becomes a “Significant Market Power” (SMP) post merger, then the
extant rules & regulations applicable to SMPs would also apply to the merged entity. TRAI has
M&A Trends in Indian Telecom Sector
Tanmay Gupta Page 8
already classified SMP as an operator having market share greater or equal to 30% of the relevant
market.
DoT has also issued guidelines on foreign equity participations and management control of telecom
companies. These have been revised from time to time. The current guidelines are
• The total composite foreign holding including but not limited to investments by Foreign
Institutional nvestors (FIIs), Nonresident Indians (NRIs), Foreign Currency Convertible Bonds
(FCCBs), American Depository Receipts (ADRs), Global Depository Receipts (GDRs), convertible
preference shares, proportionate foreign investment in Indian promoters/investment companies
including their holding companies, etc., referred as FDI, should not exceed 74%. The 74%
investment can be made directly or indirectly in the operating company or through a holding
company and the remaining 26 per cent will be owned by resident Indian citizens or an Indian
Company.
• The licencee will be required to disclose the status of such foreign holding and certify that the
foreign investment is within the ceiling of 74% on a half yearly basis.
• The majority Directors on the Board including Chairman, Managing Director and Chief Executive
Officer (CEO) shall be resident Indian citizens. The appointment to these positions from among
resident Indian citizens shall be made in consultation with serious Indian investors.
• No single company/legal person, either directly or through its associates, shall have substantial
equity holding in more than one licencee Company in the same service area for the Access Services
namely; Basic, Cellular and Unified Access Service. ‘Substantial equity’ herein will mean equity of
10% or more’.
FEMA guidelines relate to issuance and allotment of shares to foreign entities. RBI has issued detailed
guidelines on foreign investment in India vide “Foreign Direct Investment Scheme” contained in Schedule 1
of said regulation.
• As per the FDI scheme, investment in telecom sector by foreign investors is permitted under the
automatic route within the overall sectoral cap of 74% without RBI approval.
• FDI scheme prohibits investments by citizen or entities of Pakistan and Bangladesh (regulation 5)
primarily on security concerns. In the recent past, DoT has also delayed its approval to an Egyptian
company’s investment in Hutch India on similar grounds.
M&A Trends in Indian Telecom Sector
Tanmay Gupta Page 9
SEBI takeover guidelines called Securities and Exchange Board of India (Substantial acquisition of shares and
takeover - SAST) Regulations, 1997 are applicable to listed Public companies and hence would be applicable
in case of M&A in listed telecom companies like Bharti, Reliance Communication, Shyam Telecom, VSNL,
Tata Teleservices (Maharashtra) Limited, etc. These guidelines have been recently amended by SEBI and
notified vide SO No. 807(E) dated 26.05.2006. The highlights of the amendment are as follows:
• No acquirer who together with persons acting in concert with him, who holds 55% or more but less
than 75% of the shares or voting rights of the target company shall acquire by himself or through
persons acting in concert unless he makes a public announcement as per the regulations. Further, if
a target company was unlisted, but had obtained listing of 10% of issue size, then the limit of 75%
will be increased to 90%. Regulation 11(2)
• If an acquirer who together with persons acting in concert with him, who holds 55% or more but
less than 75% of the shares or voting rights of the target company is desirous of consolidating his
holding while ensuring that Public Holding in the target company does not fall below the permitted
level of listing agreement he may do so only by making a public announcement as per the
regulations. Further, if a target company was unlisted, but had obtained listing of 10% of issue size,
then the limit of 75% will be increased to 90%. - Regulation 11(2A)
• The minimum size of public offer to be made under Regulation 11(2A) shall be lesser of a) 20% of
the voting capital of the company; or b) such other lesser percentage of voting capital as would
enable the acquirer to increase his holding to the maximum possible level, while ensuring the
requirement of minimum public shareholding as per listing agreement.
Competition Commission of India (CCI), established in 2003, held statutory responsibility for ensuring
free 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 competition
authority 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 certain
modification.
M&A Trends in Indian Telecom Sector
Tanmay Gupta Page 10
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 anti-competitive agreements
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 of their assets or
turnover 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)iv.
2.2 Key Players
Telecom Service Providers
GSM is the most widely deployed mobile communications technology in India. There are many players
offering GSM services in India. The players along with the number of subscribers each player had in
September-October 2008 is summarized in the figure belowv.
M&A Trends in Indian Telecom Sector
Tanmay Gupta Page 11
Source: Voice and Data : Vital Statistics on GSM
M&A Trends in Indian Telecom Sector
Tanmay Gupta Page 12
Some of the 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 2007-08, clocking 47.8% increase. The company has
also formed an alliance with four global IT majors: Alcatel Lucent owned Mobilitec, Germany-based
CoreMedia, US-based Adamind and UK's Apertio for its service delivery platform. Continuing with its
strategy 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 Sri
Lanka 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.
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.
M&A Trends in Indian Telecom Sector
Tanmay Gupta Page 13
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.
2.3 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 fixed telephone lines in the period 1997-2007.
Source: International Telecommunications Union : Market Information and Statistics (STAT)vi
M&A Trends in Indian Telecom Sector
Tanmay Gupta Page 14
Mobile subscribers on the other hand have increased exponentially reaching a penetration of 49 per 100
inhabitants worldover. Mobile penetration in India is currently around 35%.
Source: International Telecommunications Union : Market Information and Statistics (STAT)vii
Internet has caught on in the developed world with penetration reaching 62 per 100 inhabitants in 2007.
However, in the developing world internet penetration is still abysmal. In 2007, only 17 per 100 inhabitants
had used internet on an average.
M&A Trends in Indian Telecom Sector
Tanmay Gupta Page 15
Source: International Telecommunications Union : Market Information and Statistics (STAT)viii
The following figureix shows the growth in wireless subscribers in India. The number of subscribers were
very small prior to 1998. The sector has exploded since then due to a favorable regulatory environment and
intense competition.
Source: Idea Cellular, Q3 2009 Investor Presetation
M&A Trends in Indian Telecom Sector
Tanmay Gupta Page 16
India has one of the lowest average revenue per subscriber (ARPU) rates. The ARPU was Rs. 239 in June
2008x. As more subscribers are added from the rural areas, which represent a majority of the unpenetrated
market, ARPU is expected to go down further. This trend is seen in the figure below. 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.
Source: Voice and Data, Tele-stats, Telecom Surge
2.4 Future opportunities
3G & WiMax
Auction of spectrum for 3G services is slated for Jan 2009. 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.
M&A Trends in Indian Telecom Sector
Tanmay Gupta Page 17
Growth 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.
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$ 2 billion, during 2008 to 2009, for the development of around 100,000
community service centres in rural India to provide broadband connectivity.
Additionally, by 2010, the government targets:
• 80 million rural connections
• Mobile coverage of 90 per cent geographical area
• Internet Protocol Television (IPTV) in 600 towns
• Quadrupling manufacture
• Two-fold increase in telecom equipment R&D from the current level of 15 per cent.
3 Recent partnerships, mergers and acquisitions
3.1 NTT DoCoMo takes stake in Tata Teleservices
NTT DoCoMo paid 2.7 Billion USD for a 26% stake in Tata Teleservices. The deal values Tata Teleservices at
$10 bn.
3.2 New GSM license holders
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’s
M&A Trends in Indian Telecom Sector
Tanmay Gupta Page 18
equity in a company for 3-5 yearsxi. 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 $900 mn for 45% stake in Swan Telecom.
Unitech Wireless - Norway’s Telenor
Norway-based telecom operator Telenor has bought a 60 per cent stake in Unitech Wireless for US$ 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.
3.3 Telecom Infrastructure (Tower) consolidation
Mobile subscriber base is expected to touch 500 million by 2010 for which at least 3.8 lakh more towers are
required. In a bid to tap this opportunity, telecom players have demerged their infrastructure into separate
tower 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 about
47,000 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
M&A Trends in Indian Telecom Sector
Tanmay Gupta Page 19
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 of
investors 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.
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.
3.4 Vodafone acquisition of Hutchxiii
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 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
M&A Trends in Indian Telecom Sector
Tanmay Gupta Page 20
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 Kong-based 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.
Source: The Hindu Business Line
3.5 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 re-branded 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
M&A Trends in Indian Telecom Sector
Tanmay Gupta Page 21
expansion. The primary drivers for this phase of the growth 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 Internet
bandwidth 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 10-15 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, a
leading provider of wholesale voice, data, IP and mobile signaling services, in 2005. This acquisition gave
them Teleglobe’s global network access, agreements with leading global voice carriers and an enhanced
utilization 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
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.
M&A Trends in Indian Telecom Sector
Tanmay Gupta Page 22
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-added
telecommunication 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 Idea Cellular takeover of Spice Telecomxv
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.
4.1 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 26 million, it runs
operations in Delhi, Himachal Pradesh, Rajasthan, Haryana, Uttar Pradesh (East), Uttar Pradesh (West) &
Uttaranchal, Madhya Pradesh & Chattisgarh, Gujarat, Maharashtra & Goa, Andhra Pradesh, and Kerala,
holds spectrum for Mumbai, Bihar, Orissa, Tamil Nadu (including Chennai), and Karnataka, and licenses for
the remaining six service areas.
With the planned launch of services in Mumbai, Bihar and Jharkhand in Q3 2008, and Orissa and Tamilnadu
(including Chennai) towards the end of the calendar year, Idea’s footprint will soon cover approximately
90% of India’s telephony potential. 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 $ 28 billion 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.
Refer to Exhibit 8.4 for financial results summary of Idea Cellular. More information on the company is
available at: www.ideacellular.com and on the group at: www.adityabirla.com.
M&A Trends in Indian Telecom Sector
Tanmay Gupta Page 23
4.2 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 was incorporated as Modicom Network Private Limited on 28 March 1995 as a private limited
company. 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 28
October 2003. On 28 December 2006, Spice was converted into a public limited company and assumed its
present name.
Spice currently offers mobile telecommunication services in the Punjab and Karnataka states of India. As of
30 April 2008, Spice had 4.4 million subscribers representing a 1.7% market share in India, and was the
second and fifth largest mobile telecommunication service provider within the Punjab and Karnataka
circles, respectively.
Spice was listed on the Bombay Stock Exchange Limited on 19 July 2007, and on the National Stock
Exchange of India Limited on 16 June 2008. Refer to Exhibit 8.2 for financial results summary of Idea
Cellular.
4.3 TM International Overview
TM International (‘TMI’) is an emerging leader in Asian telecommunications with significant presence in
Malaysia, Indonesia, Sri Lanka, Bangladesh and Cambodia. In addition, the Malaysian-grown holding
company has strategic mobile and non-mobile telecommunications operations and investments in India,
Singapore, Iran, Pakistan and Thailand.
The Group’s mobile subsidiaries and associates operate under the brand name ‘Celcom’ in Malaysia, ‘XL’ in
Indonesia, ‘Dialog’ in Sri Lanka, ‘AKTEL’ in Bangladesh, ‘HELLO’ in Cambodia, ‘Spice’ in India, ‘M1’ in
Singapore, and ‘MTCE’ in Iran (Esfahan).
M&A Trends in Indian Telecom Sector
Tanmay Gupta Page 24
Listed on Bursa Malaysia, TMI is among the top ten biggest public listed companies in Malaysia by market
capitalization, and the first listed pan-Asian pure cellular service provider in the region.
The Group, including subsidiaries and associates, has over 44 million mobile subscribers in Asia, putting it
among the largest mobile telecommunication providers in the region by turnover. The Group has
approximately 13,000 people under employment in ten countries.
For more information on TMI visit: www.tmigroup.com
4.4 Synergies Anticipated
This deal gave Idea Cellular another 44-lakh subscribers of Spice Communications in Punjab and Karnataka
circles in addition to own 2.6-crore subscribers in 11 circles. The acquisition of Spice gives Idea the much
needed headway in Punjab and Karnataka — states that account for more than 10 per cent of India’s
wireless subscribers. “It will give us incumbent advantage in both these circles,” said Mr. Kumar Mangalam
Birla, Chairman, Aditya Birla Group. “We are now in the big league of telecom players in the county,” added
Mr. Birla. Idea Cellular would get hold of crucial spectrum of licences recently got by Spice for operations in
four more circles including Delhi, Tamil Nadu and Andhra Pradesh.
The primary benefits of this transaction are:
• Idea gains entry in the contiguous wireless markets of Punjab and Karnataka, which account for
11% of India’s total wireless subscribers.
• Spice, a pioneering operator, delivers a strong running start in Punjab and Karnataka.
o 4.4 million subscribers as at 30 April 2008, equivalent to a 15.1% market share in the two
service areas
o #2 wireless operator in Punjab with a 22.3% market share.
• Idea to consolidate its position with its all-India subscriber market share increasing from 9.5% to
11.1%. Importantly, Idea would be No.1 in 3 service areas, in the top 3 in 5 more service areas, and
with a rapidly improving share in all its other operating service areas.
• Idea’s operations in the 900 MHz GSM spectrum band will increase from the current 7 service areas
to 9 service areas, driving scale economies and operational synergies resulting in lower operating
and capital expenditure.
TMI, an emerging leader in Asian telecommunications with over 44 mn subscribers and a presence in 10
countries, will grow its presence in the Indian telecom sector and become a substantial shareholder in Idea.
The primary benefits of TMI’s investment into Idea are:
M&A Trends in Indian Telecom Sector
Tanmay Gupta Page 25
• Idea is currently rolling out operations in Mumbai, Bihar, Orissa, and Tamil Nadu (incl. Chennai)
service areas, and will also roll out in the remaining service areas of Kolkata, West Bengal, Assam,
North East and J&K, after receipt of spectrum. This investment will support Idea’s aggressive
growth plans.
• Idea and TMI will develop areas for business co-operation to leverage TMI’s strong presence in 10
principal Asian markets, including neighboring countries like Sri Lanka & Bangladesh where TMI is a
market-leader. TMI’s experience of operating 3G in similar markets will be of value to Idea, as also
the convergent interests of the 2 companies in areas extending from international traffic to
roaming, to mobile value added services etc. Idea and TMI would sign a Business Cooperation
Agreement to this effect.
Mr. Kumar Mangalam Birla, Chairman, Idea Cellular Limited said: “This announcement marks a major step
in the Aditya Birla Group ’s telecom business. Idea has performed strongly, but I believe its best lies ahead.
Idea will benefit operationally by leveraging synergies with TMI which will be a significant shareholder in
our Company. Further, I look forward to welcoming colleagues from Spice into the Idea family, and indeed
the over 100,000 strong Aditya Birla Group. Together we aim to grow a top class organization in the service
of our subscribers”.
Mr. Sanjeev Aga, Managing Director, Idea Cellular Limited said: “The strategic import of this move travels
beyond Punjab and Karnataka. By the end of the year the Idea yellow will increasingly colour the Indian
landscape.”
In addition, the resulting infusion of funds from TMI will (Rs 7300 crore) will support the capital
requirement for
• Expansion from 11 service areas to PAN India by CY 09.
• Capex plan of ~Rs. 65bn for FY 08-09 and ~ Rs 60bn for FY09-10 for existing service areas and new
launches (excluding 3G)
4.5 Current Status
Idea has launched its brand in Punjab on Dec 19, 2008 and in Karnataka on Dec 29, 2008. It has also
announced plan to invest 300 Cr in Karnataka to expand its reach and services.
M&A Trends in Indian Telecom Sector
Tanmay Gupta Page 26
4.6 Deal Structure
The takeover deal was a complex one. Idea will acquire the Modis’ 40.8% stake in Spice (for Rs 2,720 crore)
at Rs 77.30 per share. According to the complex agreement, TM International (TMI), the Malaysian
telecommunication giant holding 39.2 per cent stake in Spice, will swap its stake for Idea shares and will be
offered 469 million shares by way of a preferential allotment of shares in Idea at a price of Rs 156.96 a
share. This will take TMI's stake in idea to 14.99 per cent. TMI will invest Rs 7,500 crore for buying this stake
in Idea Cellular and a part of these funds will be used to buy Modi's stake. The balance Rs 4,500 crore will
be used to retire the debts in Idea's books, Birla said. TMI will get one seat on Idea's board.
Spice holding structure before the acquisition was:
• 40.8% Modi Group (Promoter)
• 39.2% TMI
• 20% Other public shareholding
Spice holding structure as of today is (Refer to Exhibit 8.1 for details):
• 49.9% Promoter Group including Idea Cellular
• 49.0% TMI
• 1.1% Others (Public)
Current Idea holding is as follows (Refer to Exhibit 8.3 for details):
• 49.13% Promoter and Promoter Group
• 14.99% TMI
• 35.88% Other public shareholding including institutions
4.6.1 Planned Merger
Idea Cellular has 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. However at the current (Feb 12, 2009) price
levels:
Spice Communication Stock Price = Rs 77.0
Idea Cellular Stock Price = Rs 49.15
At current prices, Spice Communications shareholders will lose when the share swap happens. One reason
for the high price for Spice could be that only 1.1% of its shares are currently floating and news reports
suggest a lot of speculative buying and selling is happening.
M&A Trends in Indian Telecom Sector
Tanmay Gupta Page 27
4.6.2 20% open offer
The SEBI Takeover Regulations at the very rudimentary level is all about giving the public shareholders an
opportunity to get the same price which a shareholder — usually a promoter —gets on a negotiated deal.
The regulations ordain an acquirer to acquire 20 per cent of the stake from the public after having acquired
15 per cent or more of the same from the promoters. As per the SEBI SAST (Substantial Acquisition of
Shares and Takeovers) Regulations, in a listed company’s acquisition if existing promoters sell out to a new
company, public shareholders are also entitled to the same per share amount.
As per the Idea-Spice deal, Idea launched the mandatory 20% open offer for the Spice shareholders, jointly
with Telekom Malaysia International (TMI) at Rs 77.30. The open offer commenced on 17th September
2008 and closed on 6th October 2008. Following the successful completion, the above 40.8% stake which
was hitherto held in an escrow account pending open offer formalities stands transferred to Idea as of date.
4.6.3 Non-Compete fee
Sometimes, these deals involve a non-compete feexvi, a sum payable to the promoter for not re-entering
the same field for a certain period. That the fee is discretionary is evident from not all deals having a non-
compete component. The logic for the non-compete fee is that the promoter has certain unique skills and
possesses industry knowledge, and if he were to start the same business again, he could become a
formidable competitor. That entitles them to a payment which is not given to minority shareholders,
because obviously they do not possess these skills. What this means is that in the above cases, the public
shareholders got a lesser amount than the promoter.
Regulation 20 (8) of the SEBI SAST says: “(8) Any payment made to the persons other than the target
company in respect of non-compete agreement in excess of 25% of the offer price arrived at under sub-
regulations (4) or (5) or (6) shall be added to the offer price.”
Idea will pay approximately Rs 544 Crore as non-compete fee to the Spice Group. This is in addition to the
Rs. 77.30 per share that the Idea will pay for acquiring 40.8% stake (Rs 2,720 crore). Hence the total
payment to Spice Group is Rs 3,264 crore (Rs 2,720 crore + Rs 544 crore). In the absence of a non-compete
fee the Idea group would have to offer a higher per share price to Spice Group and as a result to the other
shareholders (for 20% open offer).
M&A Trends in Indian Telecom Sector
Tanmay Gupta Page 28
4.6.4 Valuation
A back-of-the envelope estimate of valuation of Spice can be arrived at based on the (Enterprise
Value)/(Number of Subscribers) multiple.
Idea has paid Rs.2716 Crore for 40.8% stake in Spice. Hence the total enterprise value (100%) of Spice will
be Rs.6657 Crore approximately. With a subscriber base of 44 lakh subscribers, the Enterprise value per
subscriber comes out to be approximately Rs.15,129 or approximately $300 (Assuming USD 1 = Rs.50) as
per this transaction. This is on the lower side as generally EV per subscriber ranges between $400 to $550.
One of the reasons for this low valuation could be that Spice is present in only 2 circles. Spice has also
underperformed as compared to other players. It has a lower EV/EBITDA multiple, ROCE and EV/Subscriber.
A comparison of these metrics (in January 2008) across players is shown belowxvii.
4.7 Summary
The drivers for this deal are as follows:
• TMI
o Grow presence in growing Indian Telecom Sector via ownership in a large Indian telecom
operator.
• Idea Cellular
o Inorganic expansion in Karnataka and Punjab circles.
o Infusion of funds from TMI to support Idea’s aggressive growth plans.
o Technical expertise from TMI including 3G operations.
o Leverage TMI’s strong presence in 10 principal Asian markets, including neighboring
countries like Sri Lanka & Bangladesh where TMI is a market-leader.
• Spice Communications
o Being a small player in a highly competitive market requiring huge investments and
economies of scale is not sustainable.
M&A Trends in Indian Telecom Sector
Tanmay Gupta Page 29
5 Reliance MTN merger failure
5.1 MTN Group
MTN was launched in 1994. It has a market value of about $38 billion and more than 68 million customers
across 21 countries in Africa and the Middle East. MTN is operating services in Africa, Iran, Afghanistan and
Syria. These are high potential markets. Some analysts have estimated that MTN has potential to
accumulate up to 240 million subscribers in these markets by 2012.
5.2 Reliance Communications
Reliance Communications Limited founded by the late Shri Dhirubhai H Ambani (1932-2002) is the flagship
company of the Reliance Anil Dhirubhai Ambani Group. The Reliance Anil Dhirubhai Ambani Group
currently has net worth in excess of Rs. 55,000 crore (US$ 14 billion), cash flows of Rs. 11,000 crore (US$ 2.8
billion), net profit of Rs. 7,700 crore (US$ 1.9 billion) and zero net debt. Rated among "Asia's Top 5 Most
Valuable Telecom Companies", Reliance Communications is an integrated telecommunications service
provider. The company, with a customer base of over 48 million including over 1.5 million individual
overseas retail customers, ranks among the Top 10 Asian Telecom companies by number of customers.
Reliance Communications corporate clientele includes 1,850 Indian and multinational corporations, and
over 250 global carriers.
Reliance Communications has established a pan-India, next generation, integrated (wireless and wireline),
convergent (voice, data and video) digital network that is capable of supporting best-of-class services
spanning the entire infocomm value chain, covering over 15,000 towns and 400,000 villages. Reliance
Communications owns and operates the world's largest next generation IP enabled connectivity
infrastructure, comprising over 165,000 kilometers of fibre optic cable systems in India, USA, Europe,
Middle East and the Asia Pacific region. For more information, visit www.reliancecommunications.co.in
Reliance Communications (previously Reliance Infocomm) was formed in 2005 when Anil Ambani and
Mukesh Ambani carved up the Reliance empire, which included telecom, oil, and financial services, after a
rivalry developed between them when their father died in 2002 and left no will. When lacking a will, the
sibs developed some ill will toward each other. An agreement was hashed out by their mother, under which
Anil Ambani took the telecom, energy, and financial services assets while Mukesh Ambani took the oil and
petrochemical business to form Reliance Industries.
M&A Trends in Indian Telecom Sector
Tanmay Gupta Page 30
Reliance has rapidly become a global wireline and wireless powerhouse, having acquired companies such as
U.S.-based Yipes Enterprise Services in recent years
5.3 Bharti in foray for MTNxviii
On May 5th 2008, Bharti Airtel Limited announcedxix that it has entered into an exploratory discussion with
MTN Group Limited, South Africa. A later statement said “The discussions being held are aimed at
combining the strengths of the two leading ‘emerging markets’ players and accordingly veering towards
possible structures to achieve this objective.”
A combination with MTN would have been Bharti Airtel’s first major foray outside India. The two companies
have roughly the same number of subscribers and market capitalization, so any deal was expected to be
more like a merger of equals, bankers and analysts said.
At the invitation of MTN board, Bharti entered into exploratory discussions on the possibility of combining
the two 'emerging market' telecom giants. A number of structures were discussed and evaluated between
the lead bankers on both sides. An in-principle agreement was reached on 16th May and a term sheet was
initialled between the two lead bankers. This agreed term sheet was presented to the MTN Board on
Wednesday, the 21st of May.
Bharti had received confident letters of funding of over USD 60 billion from over a dozen Internationally
reputed bankers from the US and Europe.
5.4 Bharti backs out: Predator or Prey?xx
On May 24rd 2008, Bharti called off negotiations after MTN turned Bharti’s takeover plan upside down,
proposing to take over Bharti instead. After bankers from both sides agreed in principle to a Bharti-
controlled structure on May 16, MTN’s board met this week and proposed a different transaction, in which
Bharti Airtel would become a subsidiary of MTN, Bharti said.
This new structure envisages Bharti Airtel becoming a subsidiary of MTN and exchange of majority shares of
Bharti Airtel held by the Bharti family and Singtel, in exchange for a controlling stake in MTN. Bharti
believes that this convoluted way of getting an indirect control of the combined entity would have
compromised the minority shareholders of Bharti Airtel and also would not capture the synergies of a
combined entity. Further and more importantly, Bharti's vision of transforming itself from a home grown
M&A Trends in Indian Telecom Sector
Tanmay Gupta Page 31
Indian company to a true Indian multinational telecom giant, symbolising the pride of India, would have
been severely compromised and this was completely unacceptable to Bharti.
5.5 Reliance in talks with MTN: Exclusive negotiationsxxi
As soon as Bharti backed out of MTN, on May 26th Reliance Communications Ltd. (RCom) stepped in, and
the two have now entered "exclusive negotiations for a period of up to 45 days with respect to a potential
combination of their businesses." Shri Anil Dhirubhai Ambani, Chairman of Reliance Communications, said
“We are delighted to be engaged in exclusive negotiations with MTN Group to achieve a partnership, which
would provide investors, customers and the people of both companies a unique and global platform for
exponential growth, creating substantial long term shareholder value.”
The discussions were around a broad framework, where MTN would take up to 74 percent in Reliance
Communications and Reliance Chairman Anil Ambani could swap between 43 and 63 percent of his holding,
depending on the success of an open offer, to become the biggest shareholder in MTN.
Morgan Stanley had estimated an open offer for Reliance Communications shareholders could be at 613
rupees per share, a 7 percent premium to the stock's closing price on May 23, the last day they traded
before the firms said they were in talks.
The Reliance-MTN deal is complicated by restrictions on foreign ownership in India and South Africa and
political sensitivities in each country about which company would be dominant. Under South African rules,
buying 35 per cent of a company obliges the purchaser to make an open offer for the rest. India limits
foreign ownership in the telecoms sector to 74 per cent and a purchase of 15 per cent of a company
triggers a mandatory open offer for another 20 per cent. Mr Ambani owns 66 per cent of Reliance
Communications, valued at about $20 billion, and intends to exchange this under a mechanism, yet to be
agreed, for a 34.9 per cent stake in MTN. The deal would represent the biggest foreign direct investment in
India to date and Mr Ambani would become the single largest shareholder in the South African company.
The deal could involve cash as well as equity to avoid breaching the restrictions - especially on Reliance,
which is already 11 per cent foreign-owned. Mr Ambani is reported to be offering to buy MTN's shares at a
significant premium in exchange for management control.
M&A Trends in Indian Telecom Sector
Tanmay Gupta Page 32
Economic Times reported that the two sides were negotiating the ratio for a share swap. Mr Ambani was
pushing for 66 MTN shares for 100 Reliance ones, while MTN wanted 51 MTN shares for 100 Reliance
shares, it said.
Some proposed details of the deal werexxii:
• Deal expected to be a part-cash and part-equity deal with a west Asia-based sovereign wealth
• It might commit close to $10 billion to ADAG
• A special purpose vehicle will be created for this deal with ADAG, which will have the controlling
stake
• Deal needs approval of black empowerment group as a non-South African company will have
majority stake
Sources said the other equity holders of the SPV are expected to chip in around $4 billion. Given MTN’s
current valuation of nearly $28 billion, a deal is expected to be done at a valuation of around $35 billion,
assuming a 20% premium. This means, the SPV may need to pay around $11-12 billion for a 35% stake.
Given the other equity holder’s contribution of $4 billion, RCOM will have to chip in around $7 billion to $8
billion. This is likely to be funded by a mixture of internal accruals and debt. The exact amount of debt
depends on the amount of equity which RCOM is willing to put in. The acquisition cost will go up if RCOM is
allowed to hike its stake further to 40%. Both the parties are yet to arrive at the exact deal size which would
depend on the premium, sources saidxxiii.
Lombard Odier Darier Hentsch & Cie, promoted by Lebanon's former prime minister Najib Mikati, holds
9.82 per cent, Newshelf 664 (Proprietary) Ltd holds 13.06 per cent and directors and subsidiaries hold 0.03
per cent. The public and financial institutions hold the rest.
5.6 The Failure: Sibling Rivalry
On June 12th 2008, in a mala fide effort to disrupt the talks, Reliance Industries Ltd. (RIL), part of the
Mukesh Ambani group, sent a communication to MTN Group, making a claim of an alleged right of first
refusal to buy the controlling stake in Reliance Communications Ltd. (RCOM). The letter further said that RIL
will take legal action against RCOM and also make exemplary damages against MTN. Reliance
communications spokesperson refuted the claim saying “RIL's claim is legally and factually untenable,
baseless, and misconceived.”
M&A Trends in Indian Telecom Sector
Tanmay Gupta Page 33
RIL based its claim on an agreement of January 12, 2006, which was unilaterally signed only by RIL's
officials, when RCOM was under RIL's control, under a procedure which the Hon'ble Bombay High Court,
vide its judgement dated 15th October 2006, has held to be "unfair and unjust."
In July 2008, Reliance Communications Ltd. (RCom) and African operator Mobile Telephone Networks
(MTN) have walked away from M&A talks "owing to certain legal and regulatory issues," namely an ongoing
feud between Reliance chairman Anil Ambani and his brother Mukesh Ambani, chairman of Reliance
Industries.
On July 9th 2008, RCOM and MTN agreed to continue their negotiations in relation to such potential
business combination, and have extended the period of exclusivity until 21st July 2008.
However, on July 18th 2008, the two companies mutually decided to allow the Exclusivity Agreement to
lapse citing certain legal and regulatory issues.
5.7 Summary
The failed attempt by the leading Indian Telecom operators to spread their wings in the growing African
market shows their global ambitions. The Reliance-MTN deal would have created a $66-billion emerging-
markets telecoms group with operations in about two dozen countries and about 120-million subscribers.
This episode highlighted the following issues:
• Such cross border deals need to be sensitive to the issue of national pride and control of the
companies. Who controls which entity and ultimately who is taking over whom is an important
consideration in this kind of merger of equals.
• Many Indian businesses are owned and controlled by promoter families. The issue of loss of control
and the difference of opinion among family members is an important consideration for such deals.
This came to fore in the Reliance MTN deal with feud among brothers scuttling the deal.
6 Conclusion and M&A Outlook
The Indian Telecom industry is one of the most dynamic in the world with an evolving regulatory
environment. It is the second fastest growing telecom market in the world after China. The overall tele-
density India has reached 34.50 % at the end of January 2009xxiv. Much of the untapped market is in rural
India. ARPU has been declining for most mobile operators over the years as more and more rural customers
are tapped. On one hand telecom operators are driven towards specialization and consolidation to achieve
economies of scale and improve margins, and on the other hand they are looking to forge partnerships to
fund their growth and get operational and technical expertise. In this study I have looked into various
M&A Trends in Indian Telecom Sector
Tanmay Gupta Page 34
Mergers and Acquisitions that have happened in the Indian Telecom Industry. The various drivers for
partnerships and M&A in the Indian telecom industry and future outlook is summarized below.
• Players from Europe, Malaysia, Japan, Middle-East entering India: 2008 was a watershed year as
India's subscriber base topped 350 million users to make its network the second largest in the
world after China, displacing the US. Many foreign players are looking to enter the growing Indian
telecom market via acquiring stake in companies that have won licenses. New Indian players have
acquired startup spectrum and are on the lookout to raise money to fund their capacity buildup as
well as cash out by selling their sought after licenses. Such deals include Global/European player
Vodafone acquiring Hutch stake, Malaysian TMI partnering with Idea, Japan’s NTT DoCoMo taking
stake in Tata Teleservices, and Middle-East players like Etisalat and Bahrain Telecom acquiring
stakes in Swan and STel respectively. More foreign participation is expected in future driven by the
upcoming 3G and WiMax auctions.
• Consolidation and inorganic subscriber growth: In the extremely competitive Indian market,
smaller players are finding it extremely challenging to compete with the biggies. The big players too
are keen on expanding their footprint and acquiring the customer base of these smaller players.
The Idea-Spice deal was driven by this. This consolidation will continue. Smaller players like Aircel
and BPL along with new smaller license holders will find it best to merge with the big players as the
industry matures and growth slows down.
• Expand global footprint: Indian players are looking to increase their presence in other growing
markets like Africa and Sri Lanka. Attempt by Bharti and Reliance to acquire MTN and introduction
of GSM services in Sri Lanka by Bharti are examples of this. Indian telecom players will continue to
look towards other growing markets like Africa and South East Asia by the way of acquisitions and
joint ventures.
• Reduce costs: ARPU for Indian Telecom operators is one of the lowest in the world and continues
to fall steadily. Although this is offset by increased subscription, profit margins are decreasing. In
order to compete in this low cost environment Indian telecom companies are rethinking their
organization. They are unbundling their core processesxxv and hiving off the infrastructure
management operations into separate entities to achieve economies of scale. Bharti Airtel,
Vodafone-Essar and Idea Cellular joining hands to set up an independent tower company called
Indus Towers is an example of this. More infrastructure sharing is expected in future. The entry of
new players such as Swan, Datacom, Unitech, S Tel, Shyam and Loop Telecom may result in many
M&A Trends in Indian Telecom Sector
Tanmay Gupta Page 35
such infrastructure sharing deals in the coming months. Unitech is learnt to be in talks with the
Tata-Quipo combine to use the latter’s infrastructure. Similarly, RCOM’s tower company Reliance
Telecom Infrastructure (RTIL) and Swan Telecom are in advanced talks for a multi-year
infrastructure sharing dealxxvi.
• Funding for growth: Telecom players are also looking to tap into global funds to finance their
aggressive growth plans. As part of the Idea-Spice deal, TMI will infuse Rs 7300 crore into the joint
venture.
• Technical expertise: With the launch of 3G and WiMax operations round the corner, Indian telecom
players will look to tap into global expertise, Idea plans to leverage expertise of TMI in running 3G
operations.
M&A Trends in Indian Telecom Sector
Tanmay Gupta Page 36
7 Exhibitsxxvii
7.1 Spice Communications Equity Holding Details
Category
- No of shares % of total No of shares % of total No of shares % of total
shares shares shares
Promoters holding 28,15,02,370 40.8 28,34,89,370 41.09 68,23,20,643 98.9
Indian 28,15,02,370 40.8 28,34,89,370 41.09 34,42,57,393 49.9
Individuals & HUF 13,020 0 20 0 0 0
Central & State Government 0 0 0 0 0 0
Corporate Bodies 28,14,89,350 40.8 28,34,89,350 41.09 34,42,57,393 49.9
Financial Institutions & Banks 0 0 0 0 0 0
Others 0 0 0 0 0 0
Foreign 0 0 0 0 33,80,63,250 49
Individuals(Non-Residents & Frgn.) 0 0 0 0 0 0
Corporate Bodies 0 0 0 0 33,80,63,250 49
Institutions 0 0 0 0 0 0
Others 0 0 0 0 0 0
Persons acting in concert 0 0 0 0 0 0
Institutions 6,26,90,940 9.09 6,27,32,778 9.09 814 0
Mutual Funds/UTI 1,56,82,035 2.27 1,18,67,824 1.72 0 0
Banks, Fi's,Insurance Cos. 0 0 0 0 0 0
Financial Institutions & Banks 0 0 0 0 0 0
Insurance Companies 0 0 0 0 0 0
Central & State Government 0 0 0 0 0 0
Venture Capital Funds 0 0 0 0 0 0
Foreign Institutional Investors 4,70,08,905 6.81 5,08,64,954 7.37 814 0
Foreign Venture Capital Investors 0 0 0 0 0 0
Others 0 0 0 0 0 0
Non-institutions 34,57,31,690 50.11 34,37,02,852 49.82 76,03,543 1.1
Corporate Bodies 2,07,28,561 3 5,74,31,982 8.32 8,49,889 0.12
Individuals 2,21,25,606 3.21 98,50,256 1.42 65,79,769 0.95
Individuals holding nominal capital
upto Rs 1 lakh
Individuals holding nominal capital
over Rs 1 lakh
Others 30,28,77,523 43.89 27,64,20,614 40.06 1,73,885 0.02
68,99,25,000 100
Spice Communications Ltd.
Non-promoters holding
Shares held by Custodians
Total equity holding
Dec 2008
76,04,357 1.1
64,80,216 0.94
0.4 99,553 0.01
0 00 0
68,99,25,000 100
Jun 2008
40,84,22,630 59.2
1,29,78,112 1.88
91,47,494
Sep 2008
40,64,35,630 58.91
70,65,726 1.02
27,84,5301.33
0 0
68,99,25,000 100
M&A Trends in Indian Telecom Sector
Tanmay Gupta Page 37
13,79,85,000 20
33,80,63,250 49
28,34,89,350 41.09
6,07,68,043 8.8Green Acre Agro Services Pvt Ltd
Spice Communications Ltd.
Type/Name of holder No of shares % of total
shares
Dec 2008
Locked-In Shares
Idea Cellular Ltd
Promoters
Tmi India Ltd
Idea Cellular Ltd
M&A Trends in Indian Telecom Sector
Tanmay Gupta Page 38
7.2 Spice Communications Audited Finance Results Summary
Spice Communications Ltd. Mar 1997 Dec 1997 Dec 2006 Dec 2007
Rs. Crore (Non-Annualised) 12 mths 9 mths 12 mths 12 mths
-
Operating income 0.02 19.64 387.38 953.03
Operating costs 0.81 38.37 177 429.54
PBDIT (NNRT) 0 -43.34 103.67 307.58
PBDT (NNRT) 0 -71.65 24.46 102.71
PBT (NNRT) 0 -100.23 -45.12 -78.68
PAT (NNRT) 0 -100.23 -45.61 -86.9
-
Foreign exchange earned 0 0 7.51 18.45
Foreign exchange used 42.92 92.89 111.61 43.89
-
Gross fixed assets (excl. reval & WIP) 2.9 492.91 1608.18 2226.02
Current assets -96.73 41.2 260.27 913.76
Net worth (net of reval. & DRE) 159.68 84.18 -180.49 798.34
Equity capital 168.95 332.94 551.94 689.93
Capital employed 217.64 494.41 1027.43 2342.08
Long term borrowings 57.96 410.23 1207.92 1543.74
Current liabilities & provisions 19.48 51.62 264.17 376.25
-
Total assets / liabilities (excl. reval & DRE) 402.85 547.77 1282.3 2693.08
-
Growth (%)
Operating income Error Error Error 146.02
Operating cost Error Error Error 142.68
Total assets Error Error Error 110.02
-
Margins ratios (%)
PBDIT (NNRT) / operating income 0 -220.67 26.76 32.27
PBDT (NNRT) / operating income 0 -364.82 6.31 10.78
PAT (NNRT) / operating income 0 -510.34 -11.77 -9.12
-
Returns ratios (%)
PAT (NNRT) / net worth -28.13
PAT (NNRT) / total assets -4.37
PBDIT (NNRT) / total assets 15.47
PBDIT (NNRT) / capital employed 18.26
-
Liquidity ratios (times)
Long term debt / equity 0.36 4.87 0 1.93
Total debt / equity 0.41 4.92 0 1.93
Current ratio -4.97 0.8 0.99 2.43
Interest cover Error -2.54 0.43 0.62
M&A Trends in Indian Telecom Sector
Tanmay Gupta Page 39
7.3 Idea Cellular Equity Holding Details
Category
- No of shares % of total No of shares % of total No of shares % of total
shares shares shares
Promoters holding 1,52,04,45,714 57.69 1,52,04,45,714 49.05 1,52,29,37,212 49.13
Indian 1,52,04,45,714 57.69 1,52,04,45,714 49.05 1,52,29,37,212 49.13
Individuals & HUF 0 0 0 0 0 0
Central & State Government 0 0 0 0 0 0
Corporate Bodies 1,52,04,45,714 57.69 1,52,04,45,714 49.05 1,52,29,37,212 49.13
Financial Institutions & Banks 0 0 0 0 0 0
Others 0 0 0 0 0 0
Foreign 0 0 0 0 0 0
Individuals(Non-Residents & Frgn.) 0 0 0 0 0 0
Corporate Bodies 0 0 0 0 0 0
Institutions 0 0 0 0 0 0
Others 0 0 0 0 0 0
Persons acting in concert 0 0 0 0 0 0
Institutions 43,90,39,060 16.66 46,95,22,725 15.15 46,64,59,138 15.05
Mutual Funds/UTI 4,59,73,304 1.74 5,29,29,448 1.71 6,34,04,215 2.05
Banks, Fi's,Insurance Cos. 9,56,67,517 3.63 12,56,20,419 4.05 14,37,44,742 4.64
Financial Institutions & Banks 7,90,28,030 3 9,88,38,717 3.19 10,69,73,278 3.45
Insurance Companies 1,66,39,487 0.63 2,67,81,702 0.86 3,67,71,464 1.19
Central & State Government 0 0 0 0 0 0
Venture Capital Funds 0 0 0 0 0 0
Foreign Institutional Investors 29,73,94,973 11.28 29,09,69,592 9.39 25,93,06,915 8.36
Foreign Venture Capital Investors 3,266 0 3,266 0 3,266 0
Others 0 0 0 0 0 0
Non-institutions 67,58,75,765 25.65 1,11,01,26,770 35.81 1,11,06,98,859 35.83
Corporate Bodies 2,14,07,793 0.81 2,46,29,245 0.79 3,04,91,012 0.98
Individuals 8,06,42,408 3.06 8,51,99,043 2.75 8,77,78,892 2.84
Individuals holding nominal capital
upto Rs 1 lakh
Individuals holding nominal capital
over Rs 1 lakh
Others 57,38,25,564 21.78 1,00,02,98,482 32.25 99,24,28,955 32
3,10,00,95,209 100
Idea Cellular Ltd.
Non-promoters holding
Shares held by Custodians
Total equity holding
Dec 2008
1,57,71,57,997 50.87
7,73,56,208 2.5
0.34 1,04,22,684 0.34
0 00 0
3,10,00,95,209 100
Jun 2008
1,11,49,14,825 42.31
6,95,64,139 2.64
1,10,78,269
Sep 2008
1,57,96,49,495 50.95
7,47,76,361 2.41
1,04,22,6820.42
0 0
2,63,53,60,539 100
M&A Trends in Indian Telecom Sector
Tanmay Gupta Page 40
49,85,97,140 16.08
46,47,34,670 14.99
2,84,74,968 0.92
83,75,26,221 27.02
28,35,65,373 9.15
22,83,40,226 7.37
17,10,13,894 5.52
24,91,498 0.08
46,47,34,670 14.99
33,00,00,000 10.64
8,95,00,000 2.89
8,42,50,000 2.72
6,15,00,000 1.98
3,93,60,382 1.27
3,56,45,682 1.15
Aditya Birla Nuvo Ltd
Idea Cellular Ltd.
Type/Name of holder No of shares % of total
shares
Dec 2008
Locked-In Shares
Aditya Birla Nuvo Ltd
Tmi Mauritius Ltd
Birla Tmt Holdings Pvt Ltd
Promoters
Lic Of India -Market Plus
Birla Tmt Holdings Pvt Ltd
Hindalco Industries Ltd
Grasim Industries Ltd
Igh Holdings Pvt Ltd
Public Shareholding
Tmi Mauritius Ltd
P5 Asia Investments Maurities Ltd
Monet Ltd
Hsbc Global Invesment Funds A/C Hsbc Global Invesment
Funds Mauritius
Wagner Ltd
Lic Of India Money Plus
M&A Trends in Indian Telecom Sector
Tanmay Gupta Page 41
7.4 Idea Cellular Audited Finance Results Summary
8 Endnotes
i IndiaCore. Telecom. Retrieved on January 25, 2009 from IndiaCore: http://www.indiacore.com/telecom.html
Idea Cellular Ltd. Mar 2003 Mar 2004 Mar 2005 Mar 2006 Mar 2007 Mar 2008
Rs. Crore (Non-Annualised) 12 mths 12 mths 12 mths 12 mths 12 mths 12 mths
-
Operating income 851.48 1165.52 1625.43 2007.07 4366.4 6719.99
Operating costs 370.23 518.74 643.75 842.28 1945.87 3203.07
PBDIT (NNRT) 228 336.27 603.45 725 1502.43 2408.97
PBDT (NNRT) 25.71 77.64 348.74 465.91 1157.93 1937.36
PBT (NNRT) -232.61 -205.99 26.47 118.37 483.24 1060.6
PAT (NNRT) -232.61 -205.99 26.47 115.47 476.24 945.57
-
Foreign exchange earned 12.28 39.47 50.73 69.95 72.8 79.03
Foreign exchange used 294.95 227.17 264.88 339.53 949.87 1634.26
-
Gross fixed assets (excl. reval & WIP) 3057.52 3275.63 3577.54 3981.07 8224.88 12658.92
Current assets 123.61 350.72 387.59 1621.99 2473.9 2162.79
Net worth (net of reval. & DRE) 973.53 1016.87 1042.93 1168.53 2179.16 3546.04
Equity capital 2139.53 2259.53 2259.53 2259.53 2592.86 2635.36
Capital employed 1804.91 2535.32 2738.89 2740.28 5894.62 9176.21
Long term borrowings 831.38 1518.45 1695.96 1571.75 3715.46 5630.17
Current liabilities & provisions 1315.34 1194.23 1451.81 2119.95 2695.77 3570.08
-
Total assets / liabilities (excl. reval & DRE) 3231.94 3886.65 4214.51 4906.25 8642.04 12837.43
-
Growth (%)
Operating income 26.86 36.88 39.46 23.48 117.55 53.9
Operating cost 18.66 40.11 24.1 30.84 131.02 64.61
Total assets 13.94 20.26 8.44 16.41 76.14 48.55
-
Margins ratios (%)
PBDIT (NNRT) / operating income 26.78 28.85 37.13 36.12 34.41 35.85
PBDT (NNRT) / operating income 3.02 6.66 21.46 23.21 26.52 28.83
PAT (NNRT) / operating income -27.32 -17.67 1.63 5.75 10.91 14.07
-
Returns ratios (%)
PAT (NNRT) / net worth -29.09 -20.7 2.57 10.44 28.45 33.03
PAT (NNRT) / total assets -7.67 -5.79 0.65 2.53 7.03 8.8
PBDIT (NNRT) / total assets 7.51 9.45 14.9 15.9 22.18 22.43
PBDIT (NNRT) / capital employed 12.58 15.5 22.88 26.46 34.8 31.97
-
Liquidity ratios (times)
Long term debt / equity 0.85 1.49 1.63 1.35 1.7 1.59
Total debt / equity 1.87 2.25 2.59 2.53 1.95 1.84
Current ratio 0.09 0.29 0.27 0.77 0.92 0.61
Interest cover -0.15 0.2 1.1 1.46 2.4 3.25
M&A Trends in Indian Telecom Sector
Tanmay Gupta Page 42
ii Indian Brand Equity Foundation. Telecommunications Industry. Retrieved on January 25, 2009 from IBEF:
http://www.ibef.org/industry/telecommunications.aspx
iiiM&A in Indian Telecom Industry – A Study, Sanjoy Banka, Retrieved on March 6, 2009 from
http://www.icai.org/resource_file/9846927-941.pdf
iv The Handbook of Competition Enforcement Agencies 2008, Retrieved on March 6, 2009 from
http://www.globalcompetitionreview.com/reviews/7/sections/16/chapters/158/india/
v Voice & Data. Telestats. Retrieved on January 20, 2009 from Voice&Data:
http://voicendata.ciol.com/content/stats/208120402.asp
vi International Telecommunications Union : Market Information and Statistics (STAT). Retrieved on Jan 29, 2009 from
ITU : http://www.itu.int/ITU-D/ict/statistics/ict/
vii International Telecommunications Union : Market Information and Statistics (STAT). Retrieved on Jan 29, 2009 from
ITU : http://www.itu.int/ITU-D/ict/statistics/ict/
viii International Telecommunications Union : Market Information and Statistics (STAT). Retrieved on Jan 29, 2009 from
ITU : http://www.itu.int/ITU-D/ict/statistics/ict/
ix Idea Cellular, Q3 2009 Investor Presetation. Retrieved on Jan 15, 2009 from from Idea Cellular website:
http://www.ideacellular.com/ShowBinary/BEA%20Repository/idea/InvestorPresentation/InvestorPresentationQ3FY0
9.pdf
x Voice and Data, Tele-stats, Telecom Surge. Retrieved on Jan 29, 2009 from V&D :
http://voicendata.ciol.com/content/stats/108120401.asp
xi Business Line. Existing telecom cos against lock-in of promoter’s equity. Retrieved on Feb 2, 2009 from Business Line:
http://www.blonnet.com/2009/02/01/stories/2009020151140100.htm
xii The Hindu. Bahrain-based company acquires stake in S Tel. Retrieved on Feb 2, 2009 from The Hindu:
http://www.hindu.com/2009/01/19/stories/2009011960061100.htm
xiii The Hindu Business Line. An episode in Vodafone story. Retirieved on Feb 2, 2009 from The Hindu Business Line:
http://www.thehindubusinessline.com/2008/12/13/stories/2008121350060900.htm
M&A Trends in Indian Telecom Sector
Tanmay Gupta Page 43
xiv For the sake of consistency, the company is referred to as Tata Communications across the report as appropriate,
although events prior to 2008 are carried out under the name of VSNL.
xv Idea Cellular Press Release. 25th June 2008. Last retrieved on Feb 10, 2009 from Idea Cellular:
http://www.ideacellular.com/ShowBinary/BEA%20Repository/idea/MajorEvents/SpiceGroup.pdf
xviEconomic Times. SEBI for fair non-compete fee in takeover deals. Retrieved on Feb 2, 2009 from Economic Times:
http://economictimes.indiatimes.com/Stocks_News/For_fair_non-
compete_fee_in_takeover_deals/articleshow/2488171.cms
xvii M&A in Indian Telecom Industry – A Study, Sanjoy Banka, Retrieved on March 6, 2009 from
http://www.icai.org/resource_file/9846927-941.pdf
xviii Media statement from Bharti Airtel Limited. May 13, 2008. Last retrieved on Feb 11, 2009 from Bharti:
http://www.bharti.com/136.html?&tx_ttnews[pointer]=4&tx_ttnews[tt_news]=284&tx_ttnews[backPid]=135&cHash
=08f68cef50
xix Media statement from Bharti Airtel Limited. Last retrieved on Feb 11, 2009 from Bharti:
http://www.bharti.com/136.html?&tx_ttnews[pointer]=4&tx_ttnews[tt_news]=286&tx_ttnews[backPid]=135&cHash
=fc050a1d84
xx The New York Times. $50 Billion Bharti-MTN Deal Falls Apart. Retrieved on Feb 9, 2009 from The New York Times:
http://dealbook.blogs.nytimes.com/2008/05/24/50-billion-bharti-mtn-deal-falls-apart
xxi Reliance Communications Media Release. Reliance Communications and MTN GROUP to enter into exclusive
negotiations. May 26, 2008. Retrieved on Feb 15, 2009 from Reliance:
http://www.rcom.co.in/webapp/Communications/rcom/IR/pdf/Media_Rlease_dated_260508.pdf
xxii Indian Express. Final call placed for Reliance-MTN deal. July 16, 2008. Retrieved on Feb 16, 2009 from Indian
Express: http://www.indianexpress.com/news/final-call-placed-for-reliancemtn-deal/336089/2
xxiii http://www.traderji.com/equities/22723-mtn-reliance-deal.html
xxiv
http://www.infraline.com/showdetailsn.asp?table=telecom&headline=Wireless%20subscriber%20base%20touches%2
015.41%20million%20customers%20in%20Jan&ndate=2/21/2009
M&A Trends in Indian Telecom Sector
Tanmay Gupta Page 44
xxv Unbundling the Corporation, Harvard Business Review, March-April 2009
xxvi http://ginwireless.wordpress.com/category/datacom/
xxvii CMIE Prowess Database