M&A strategies in

Indian Telecom
Sector
Introduction
• The overall tele density
increased from 66.16 per
cent in 2010 to 74.15 per
cent in 2011
• The telephone subscriber
base increased from
787.28 million in 2010 to
926.53 million at the end of
2011, an increase of 17.6
per cent.
• Call rates are one of the
lowest in the world.
 Features of telecom
industry
• Outsourcing non-core activities
like IT, network
• Infrastructure sharing
• Paradigm shift from average
revenue per user(ARPU) to
realization per min
• Focus on Prepaid
• Low cost distribution, e-Charge
 Features of telecom industry
• Low customer acquisition cost
• Low switching cost
• High network utilization leading to high
minutes of use rates
Comparison of service provider's market share
Market share as on Market share as on
Sr. No. Service Provider
31.12.10 31.12.11
1 Bharti Airtel 20.27 19.65
2 Reliance 16.7 16.79
3 Vodafone 16.52 16.53
4 BSNL 11.53 10.83
5 Tata 11.2 9.34
6 Idea 10.87 11.9
7 Aircel 6.67 6.9
8 Uninor 2.46 4.06
9 Sistema 1.12 1.68
10 Videocon 0.97 0.61

Source: TRAI
M&A Activity over the past three years
  FY09 FY10 FY11

Number of deals      

Domestic 11 13 10

Inbound 9 15 8

Outbound 5 8 6

Total 25 36 24

Deal Value (in million US$)      

Domestic 1335 2248 1148

Inbound 1421 1958 5363

Outbound 50 11042 172

Total 2806 15248 6683

Source: E&Y
 Why go for M&A?
• Market not big enough to
accommodate all players
profitably- hunt or be hunted
• Sharing of resources makes
sense, to cut costs
• Increased market share
• Gain technology, spectrum
• Focus on entering new markets
• High leverage of existing players
• Lower valuations
Concerns on M&A
• High regulatory uncertainty
• Unable to derive synergy
• High prices paid
• Market has become mature
• Pricing pressure still exists
• No differentiation among
existing players
• High exit barriers
 Concerns on M&A contd.
• Merged entity has limits on market
share, though changes are being made
in NTP 2011
• Spectrum to be returned if more than 15
MHz
• No customer loyalty
• After MNP, maintaining market share is
difficult
Reasons for success
• Ability to gain synergy benefits
due to:
 sharing of billing system,
 customer services,
 towers,
 advertising and marketing, etc.
• Increased market power and
network effect
• Reduced capital expenditure
• Ability to transfer best
practices
 Reasons for failures
• Policies discourages same circle M&As
• Technology shifts
• Latest Supreme Court ruling affects M&A
Thank You!!!!