Business Daily from THE HINDU group of publications
Sunday, May 25, 2008
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Business Daily from THE HINDU group of publications Sunday, May 25, 2008 ePaper | Mobile/PDA Version | Audio |
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Telecommunications Info-Tech - Mergers & Acquisitions
Thomas K Thomas
New Delhi, May 24 Indian telecom companies may want to go global but, so far, they have had mixed success. While Bharti Airtel, Tata Communications and Reliance Communications have had a fair share of success in the long-distance segment through acquisition of cable networks, including Tyco Global and FLAG, they have failed to acquire telecom licences in countries such as Qatar, Kenya and Saudi Arabia. Bharti’s attempt to acquire South African major MTN only adds to that list. The reason for the partial success has primarily been the pricing of the acquisitions. Most of the successes for Indian telecom players have come in cases where the deal came cheap. For instance, both Tata Group and RCOM acquired Tyco Global and FLAG respectively when the global undersea cable market was facing a bandwidth glut. In 2004, Tata paid just $130 million to acquire Tyco Global Network, which had 60,000 km of cable spread across three continents. The following year, the Tatas acquired another long-distance player, Teleglobe, for $239 million which catapulted the company to the number-three international bandwidth provider in the world. Similarly, Bharti bagged licences for Seychelles in 1998 when mobile services were just beginning to reach consumers. Bidding against biggiesHowever, Indian telcos have lost out whenever competitive bidding has taken place. For example, Bharti and Reliance lost out in the race to acquire a licence in Saudi Arabia after Kuwait Mobile Telecom Company bid a whopping $6 billion. Indian telcos also lost out to France Telecom when 51 per cent of Telkom Kenya was up for grabs. France Telecom coughed up nearly $400 million for 2.8 lakh fixed-line telephone subscribers. The talks between Bharti and MTN may also have failed due to price considerations, as the South African company wanted $50 billion while Mittals were prepared to give about $3 billion. Analysts said that Indian operators are already working on thin margins, given the low tariffs in the country, and therefore they cannot afford an expensive buy to maintain profitability. The other reason is that home-grown operators are still small in scale compared to global giants such as Vodafone, giving them lesser chance of winning a competitive bid. In the case of the Bharti-MTN deal too, the Indian company refused to get into a pricing war by putting in a bid even as others like Etisalat expressed interest in quoting a price. RCom buys UK-based WiMax operator MTNL readies Rs 500 cr for overseas operations More Stories on : Telecommunications | Mergers & Acquisitions | Reliance Communications Ltd
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