|
Carrier Services
India: Telecom sector needs US$73 billion to achieve 45 percent teledensity
Bharti Airtel looking at local acquisitions and overseas merger
by Ek Heng, Asia-Pacific Correspondent
India’s largest mobile operator, Bharti Airtel, whose service now reaches 100 million subscribers, is looking at local acquisitions and has revived negotiations with South Africa’s MTN Group Limited.
Now considered the world’s third largest telco in terms of total subscribers, Bharti Airtel’s chairman, Bharti Mittal has reportedly touched on the prospects of industry consolidation in the country. He called for greater clarity in local merger and acquisition rules which currently do not allow existing Indian telecom operators to buy a new competitor within the first three years of its operation.
Bharti Airtel has reportedly re-launched merger talks with MTN that could potentially create a US$61 billion telco group with 200 million customers. Talks last year failed over the issue of control of the merged entity, as did MTN’s negotiations with a second Indian telco, Reliance Communications.
Cash and share swap
A recent Reuters report indicated that the two telcos are mulling an initial deal worth over US$23 billion, under which Bharti would pay cash and shares to end up with 49 percent of MTN, after MTN pays cash and stock for an effective 36 percent stake in the Indian telco.
The proposed cash and share swap deal has attracted differing views from various analysts but the companies emphasize that the talks are preliminary while a deadline of end July has been indicated. Singapore Telecommunications has a 31 percent stake in Bharti Airtel.
According to Bundeep Singh Rangar, chairman of IndusView Advisors, a cross-border advisory firm, the telecom sector accounted for the highest share of deals at 18.6 percent and 22 percent of merger and acquisition deals in India in the past two years. From a numbers standpoint, the value was US$5.7 billion and US$11 billion in 2008 and 2007, respectively. Rangar added that “it shows what a catalyst a stable government with an unencumbered policy toward economic liberalization can do.”
But M&A deals during the first four months of 2009 at US$2 billion against US$9.43 billion for the corresponding period last year illustrates the impact of the economic slowdown, he said. He added that the combined entity will be amongst the top five service providers globally with operations spanning more than 23 countries in Asia, Middle East and Africa.
Liberal rules to attract FDI
Rangar highlighted government estimates that suggest the telecommunications sector will need US$73 billion over the next five years to achieve a teledensity of up to 45 percent. And, a major chunk of the investment is expected to be realized through Foreign Direct Investment (FDI), particularly in the area of mobile communication.
“The Indian National Congress led government’s pledge to revive the economy from the slowdown with continued liberalization will likely see more regulatory reforms toward attracting investments in the telecom sector,” Rangar said.
India’s overall teledensity was 33 percent at end-2008 with a big disparity between rural and urban areas - nearly 13 percent against 81 percent, respectively.
|
