India telecom sector clocks $14.7 billion M&A deals

Indian telecom sector recorded $14.7 billion worth M&A deals in 2017 — more than 5-fold increase from 2016.

The number of telecom M&A deals in India was 19, the same as the last year. The majority of the transactions were domestic in nature, accounting for 92 percent of the sector’s deal value and 58 percent of the deal count, according to consultancy firm EY.
M&A deals in India telecom sector in 2017Wireless tariff war, entry of Reliance Jio, heavy investment in spectrum and huge Capex for network infrastructure, among others, were the triggers for M&A deals.

Telecom industry heads Sunil Mittal, Mukesh Ambani and Kumar Mangalam Birla were active in the consolidation journey of Indian telecom industry.

EY said the Indian telecom industry has been facing stiff competition for long, with wireless tariff wars hitting the bottom line of companies. This has exerted a heavy drag on companies’ balance sheets especially when they continued spending money aggressively on spectrum acquisition and infrastructure development.

Main deals

Bharti Airtel agreed to buy Norway-based Telenor’s India unit in February to enhance its customer base and network.

UK-based Vodafone and Indian telecom operator Idea Cellular signed $11.6 billion merger agreement in March to combine their Indian operations (excluding Vodafone’s 42 percent stake in Indus Towers) to become the largest telecom operator in India.

Bharti Airtel agreed to buy Tikona Digital Networks’ 4G business, including its broadband wireless access spectrum and 350 cellular sites in five telecom circles, in a deal valued at $244.5 million.

Airtel also decided to acquire Tata Teleservices and Tata Teleservices Maharashtra’s consumer mobile business. Tata Teleservices will retain its enterprise business as part of the deal.

Reliance Jio agreed to buy the wireless spectrum, tower assets, optical fiber network and media convergence node assets of Reliance Communications. Anil Ambani is looking for a lean organization to focus on 4G.

Vodafone India and Idea Cellular sold their tower business to American Tower Corporation Telecom Infrastructure for $1.2 billion.

EY said the Indian telecoms market will shift from a fragmented mobile services industry with multiple operators to a more balanced market with three to four strong players. Consolidation will be taking a firm shape in 2018 and the new National Telecom Policy (NTP 2018) will be a catalyst.

“We expect to see acquisitions and tie-ups aimed at gaining new technologies and moving to new business models, such as building IoT capabilities and entering the mobile virtual network operator (MVNO) market to build new revenue streams and fight competition,” EY said.

Easing of the spectrum cap to 35 percent from 25 percent and removal of the 50 percent cap on the holding of the total spectrum, plan of allowing 100 percent FDI through the automatic route, will drive merger deals.