Missed Call

VoicenData Bureau
New Update

The Indian telecom service provider cited several reasons to pull out of the

merger talks that would have created a telecom behemoth with a combined market

cap of around $80 bn and the new entity's presence in twenty-five emerging



 Difference over control of the merged entity tops the reason for calling off

talks. Bharti Airtel began talks with MTN to acquire a substantial stake in the

African telecom operator. Later, negotiations were on for a merger but ended

with MTN asking Bharti Airtel to become a subsidiary of MTN. Are Indian mobile

operators losing sheen in the global market?

 Not yet, considering Reliance Communications' interest in talking to MTN for

an alliance. Though the outcome will depend on the valuation and objective of

the Anil Ambani-promoted company, the initiatives show that the country's

operators have grown to a level where they can be more ambitious and predatory.

 Sunil Bharti Mittal, who built a telecom venture from the scratch, has lost

the bid because he was aiming to create a global telecom giant spanning

twenty-five nations without losing his company's control. Anil Ambani appears to

have similar dreams. Time will tell whether the Ambanis can pursue the deal.


Baburajan K

 If an Indian operator could convince MTN for a merger/acquisition, it could

check Vodafone and other players from strengthening their presence in emerging


 As always feared by telecom infrastructure vendors, consolidation moves by a

combined entity would ease pressure on the costs of telecom infrastructure as

the combined entity would have more bargaining power. This would result in

better wealth creation for investors, while subscribers will experience quality



 Africa has already become a leading market for telcos. Indian operators,

including Reliance Communications, the Ruias-promoted Essar Group, Bharti Airtel,

and Tata Communications, have been looking for telecom assets in Africa.

Recently, Essar Communication Holdings bought a 49% stake in Econet Wireless

International, which has mobile operations in Kenya. Reliance wants to invest in

WiMax network in Africa through its recently acquired eWave World; and Tata

Communications has already established presence in South Africa through Neotel.

Africa and the Middle East have the potential to become goldmines for telcos

considering the poor telecom density and high ARPU levels (when compared with


Africa had 65 mn new subscribers in 2007 alone, and mobile phone penetration

has risen from just one in fifty people in the year 2000 to one third of the

population at present. India is adding 7-8 mn subscribers a month, and

one-fourth of the population has phones.

 India, Africa, and the Middle East have similar ARPU woes. But ARPUs in many

African nations are hovering between $12-20, while ARPUs in India are between

$5-$8. Since Bharti Airtel is out of the contest, it is now Reliance

Communications' turn to show its strength. India is waiting to celebrate such a

large deal.

Baburajan K