Latest Expert Exchange Queries

GST Demo Service software link:
Username: demouser Password: demopass
Get your inventory and invoicing software GST Ready from Binarysoft
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing | GST - Goods and Services Tax
Popular Search: form 3cd :: empanelment :: TDS :: due date for vat payment :: ACCOUNTING STANDARDS :: VAT Audit :: ACCOUNTING STANDARD :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: VAT RATES :: cpt :: ARTICLES ON INPUT TAX CREDIT IN VAT :: TAX RATES - GOODS TAXABLE @ 4% :: list of goods taxed at 4% :: articles on VAT and GST in India :: Central Excise rule to resale the machines to a new company
« Mergers and Acquisitions »
 Is India a more conducive market for mergers than acquisitions?
 Decoding The Merger And Acquisitions Trends In Indian Startup Ecosystem
 India witnesses high level of merger and acquisition in online food delivery start-up space
 Financial services ripe for mergers and acquisitions
 Telecom M&As mean better spectrum utilisation, services: Govt
 Vodafone India-Idea Cellular merger deal gets CCI nod
 Surge in due diligence activity brings flood of business to big four
 As Reliance rolls out Jio Phone for 'free', mergers among smaller telcos may accelerate
 Building market institutions can help M&As move faster
 How corporate mergers and acquisitions impact small investors
 Merger control triggers and thresholds in India

Valuation drop: global telcos eye M&A route
November, 05th 2009

The month-long battering that stocks of telecom companies have taken on the bourses has resulted in a huge dent in their market capitalisations, making mergers & acquisitions in this space more affordable today than one year ago. When Japans NTT DoCoMo picked up a 26% stake in Tata Teleservices for $2.7 billion last November, for instance, it valued the company at a staggering $10.38 billion.

An India representative of a leading global telecom major said it has become more attractive to enter India through a direct buyout of existing assets, rather than acquire a fresh licence through an auction and build a network from scratch. Some biggies had missed the India story due to various reasons. Now, some of them may be tempted to come through the direct acquisition route, given the cheap valuations. It could also impact the 3G spectrum auctions, especially if some telecom majors switch strategy and go into acquisition mode.

Consider this: the countrys largest telecom operator, Bharti Airtel, saw its market cap erode by almost a third to Rs 51,409.25 crore between October 1 and November 3. Reliance Communications saw the steepest decline, 47.83%, to Rs 31,393.85 crore during the period. Idea Cellulars market cap fell 31.44% to Rs 7,192.22 crore.

We see average revenues per user declining 20-22% this year and 14-15% next year. More than subscriber addition, the fight would be subscriber retention. Revenue growth for all operators would now either be in high single digits or at best low double digits. With pressure on Arpus, the industry would witness significant cash burn, which would be a key trigger for consolidation, Crisil Research head of research Manoj Mohta told FE.

KPMGs Romal Shetty agrees: Mobile operators are going to have challenging times in the next one-and-a-half years. On the one hand, they are engulfed in a fierce tariff war accentuated by per-second billing eroding Arpus. On the other, talk time usage is not going up, with net subscriber addition largely coming from rural areas. Further, with new operators entering the market, things are only going to get worse.

What this essentially means is a serious correction in the valuation of telecom companies. Prior to DoCoMos entry, the telecom sector had seen the worlds seventh-largest telecom company, Norways Telenor, acquiring 67.25% in new licensee Unitech Wireless, valuing it at $1.82 billion.

UAEs Etisalat acquired 45% in Swan Telecom for around $900 million, valuing the company at $2 billion.

Calculating the valuation of a telecom firm itself will change.

Today, we measure valuation as the number of subscribers multiplied by the dollar value. But with dirt-cheap tariffs, subscriber numbers will become meaningless, as companies will offer free minutes to attract customers. Instead, revenue margins on subscribers and the consequent Ebidta margins will gain precedence, Shetty added.

Home | About Us | Terms and Conditions | Contact Us
Copyright 2017 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Binarysoft Technologies - Our Team

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions