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 countries.

 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 countries.

 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 services.

 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 India).

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
baburajank@cybermedia.co.in