The Changing Facet of Telecom

The change in the tech and telecom industry is palpable with a host of mergers and acquisitions recently. Whether it’s the Nokia-Microsoft deal or Verizon-Vodafone deal, one thing is certain, that this sector is heading for a wide transformation.

Nokia, once the king of good times, has finally found shelter under Microsoft with the latter deciding to buy it out in a $7.2 bn deal.

Although, the Microsoft-Nokia deal talks were doing the rounds for quite some time but it is all set to fructify now. No doubt, the beleaguered business of Nokia will get a boost with the deal though in the midst it is on the verge of losing its own identity.

Once claimed to be the #1 handset maker, Nokia bite the dust with its rivals Apple and Samsung getting stronger on the back of new smartphone launches.

Meanwhile, for Microsoft there are challenges ahead as it is not an android operating system, but it is entering into the mobile ecosystem.

“This is the best option for Nokia and Microsoft. Though there are challenges, but with this Microsoft has armed itself to compete with its rivals Apple and Google.

Acquiring Nokia will help it to combine its Windows Phone operating system with the hardware and at the same time will help in expanding the smartphone-related patent portfolio. Microsoft is slowly moving from its traditional desktops and laptops to smartphones and tablets,” said Girish Trivedi, founder, Monk Consulting.

Just after the announcement, shares of Nokia jumped more than 40% to 4.15 euros, currently its biggest ever one-day rise in volume 8 times its 90-day average.

.In a note, Deutsche Bank, estimating Nokia could trade up to 4.40 euros per share, said that “given the material expected benefits to Nokia’s earnings, net cash, and upside in the share price from current levels, we upgrade from ‘sell’ to ‘hold’.”

Frost & Sullivan said the mobile ecosystem is evolving very fast and Microsoft has place big bets on its Windows 8 OS. The response from other mobile device companies for Windows 8 based mobile phones was not very encouraging. Hence, it will be critical for Microsoft to have a strong company at their side to implement their strategy.

With a couple of new and good product launches similar to Lumia, Microsoft should be able to create the much needed momentum in Windows mobile ecosystem. Moreover, we just started witnessing the gradual transition from feature phones to smartphones in countries like India. With Nokia, Microsoft can effectively leverage to penetrate into the high entry-level segment in India.

At the same time, Verizon Communications (VZ.N) is all set to buy Vodafone group for $130 bn out of its US wireless business which is history’s third-largest corporate deal announcement.

The tie-up will give Verizon full access to the profits from the United States’ largest mobile operator. “I think there’s going to be a burst of rocket fuel in the Verizon engine as a result of this transaction,” a company executive told Reuters.

The final agreement follows years of speculation as to whether Vodafone, the world’s second largest mobile operator, would leave or be forced out of the highly successful business.

Talks between the two sides picked up as Verizon grew concerned that its window of opportunity was closing, with interest rates due to rise and its own stock price declining. That prompted Verizon to raise the offer from the $100 bn it had initially floated to close to Vodafone’s asking price of $130-$135 bn, Reuters reports said.

The deal will become the third largest announced deal in the world after Vodafone’s $203 bn takeover of Germany’s Mannesmann in 1999 and AOL’s $181 bn acquisition of Time Warner the following year.

On the domestic front, Bharti Airtel has emerged the frontrunner to acquire Loop Mobile, one of Mumbai’s oldest cellular networks, as the company’s owners look to exit the telecom sector, according to reports.

Talks with Airtel were going on for some time and have gathered momentum in recent weeks. But a final deal is dependent on clarity on guidelines governing mergers and acquisitions in the telecom sector and the renewal fee for Loop’s license, which expires in September 2014.

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