Tasting Success
The pressure from existing and new operators prompted Idea Cellular to go for its first deal post the IPO. Through the acquisition of Spice Group's 40.8% stake in Spice Communications for Rs 2,700 crore, the Aditya Birla Group has also ensured that it has now a strong partner, Telecom Malaysia, which has presence across Asia.

Post-acquisition, TM International, which was a strategic partner in Spice, will have a 15% stake in Idea Cellular.

As part of the deal, Idea and TMI are planning a business co-operation pact to leverage TMI's presence in ten Asian markets, including neighboring countries like Sri Lanka and Bangladesh where TMI is a market-leader. Idea will be utilizing TMI's experience of operating 3G in similar markets. And both the companies will work together on segments ranging from international traffic to roaming, mobile VAS, etc.

According to Kumar Mangalam Birla, chairman, Idea Cellular, “This association marks a major step in Aditya Birla Group's telecom business. Idea will benefit operationally by leveraging synergies with TMI which will be a significant shareholder in our company.”

With the success of the deal with Spice, Idea Cellular, which has licenses to operate in all twenty-two circles with commercial operations in eleven circles, gains entry in the wireless markets of Punjab and Karnataka, which account for 11% of India's total wireless subscribers.

VOICE&DATA research based on ITU data

Sanjeev Aga, managing director, Idea Cellular says, “The strategic import of this move travels beyond Punjab and Karnataka. By the end of the year the Idea yellow will increasingly color the Indian landscape.” With the planned launch of services in Mumbai, Bihar, and Jharkhand in Q3, and Orissa and Tamil Nadu (including Chennai) toward the end of the calendar year, Idea's footprint will soon cover approximately 90% of India's telephony potential.

Try and Re-try
MTN, following its earlier failed attempt to attract Bharti Airtel for a merger, started looking for a partner in India. Feeling the pressure from competitors, Reliance Communications, keen to spruce up its presence overseas, came into picture as a possible partner for MTN within 24 hours of the collapse of talks with Bharti Airtel.

The merger would have created a company with a market cap of around $70 bn and presence in twenty-two countries.

Both the companies have a lot of synergies. Both Reliance Communications and MTN are actively seeking telecom licenses in Africa and other emerging markets.

ARPUs of MTN have declined marginally in most operations, consistent with increased penetration into lower segments of each market. According to MTN, the combined size of all operations of the MTN group is estimated to be over 300 mn subscribers by 2012. It is also focused on accelerating infrastructure roll out and extracting regional synergies.

However, the ongoing family feud between the Ambani brothers forced MTN to pull out of merger talks with Anil Ambani controlled Reliance Communications. With this, Reliance Communications lost a big opportunity to look beyond India. Mukesh Ambani's tough stand against his brother resulted in a deadlock in negotiations. Reliance Industries claimed the first right of refusal if Reliance Communications is looking for a strategic equity partner. RIL moved to arbitrator to solve the issue. The possible prolonged legal tussle was unacceptable to MTN.

MTN's talks with Bharti Airtel collapsed as Sunil Mittal never wanted to give up control of the company. Bharti Airtel, fresh from the failure of negotiations, will be looking at options to improve its revenue and subscriber base, and there are indications that MTN may approach the Mittals again to restart negotiations.

A Second Shot
Once bitten, AT&T is preparing to re-enter India's wireless business. This time, it is considering buying out Maxis Communications' stake in Aircel. However, Maxis Communications has denied this and reiterated its commitment to build Aircel's mobile business in India. Earlier, AT&T had approached the government when spectrum was available to new USAL licenses. AT&T has already received national and international long distance licenses in the country.

Adding telecom license in a country like India is important for the $119 bn company. AT&T's wireless business in the US is nearing saturation. Its voice business is under competition and pricing pressure, though it is the global leader. Since too many operators are not available for sale at present, AT&T's main option would be to buy out a pan-Indian operator like Aircel or go for a new license.

Aircel has invested close to $2 bn. Its revenue during FY 2007-08 was Rs 2,528 crore on a subscriber base of more than 10 mn in ten circles. The company has also received spectrum in the remaining twenty-three circles. AT&T's presence will definitely spice up the Indian telecom market. Enterprise customers are really looking at a player like AT&T for enterprise applications.

Regulatory Issues
The union government, in the face of elections, should re-look into telecom policies of the country in order to ensure that it achieves its mobile and broadband targets. A well defined 3G policy has the potential to bring in more FDI. Several telecom companies are waiting for a clear policy and timely spectrum allocation.

Scaling up broadband penetration will improve the top line of operators as well. This will contribute to growth of the Indian economy, which may be affected if the present global downturn continues for some more time.

Considering the population, both Asia and Africa hold promises for future growth. The population and mobile users in Africa stood at 964 mn and 271 mn, respectively. Asia has a mobile subscriber base of 1,466 mn against a population of 3,977 mn in 2007. While Europe is already overexploited, operators can tap into Americas, which has a mobile user base of 653 mn on a population of 910 mn.

Indian operators have already kicked off their initiatives to buy telecom properties abroad. But they need to step up their efforts as global telecom companies are eyeing the Indian presence, giving tough competition in their home turf.

Baburajan K
baburajank@cybermedia.co.in