Indian has achieved an overall teledensity of 67% and rural teledensity of 31%. Indian telecom industry is fast becoming an attractive destination for foreign investors and is experiencing consolidation of operations. It has witnessed several multi-billion dollar M&A deals ever since the telecom industry was opened to the private players in 1995.
In the Indian telecom industry, most of the acquisitions were horizontal which helped the acquirers to expand the area of their operation and customer base quickly. These provided economies of scale with phenomenal benefit to the acquirers in terms of higher profitability, and better valuations.
2. Regulations governing M&A based on recommendations by TRAI:
3.1. Any merger or acquisition should not give rise to a monopoly situation in the market i.e. the merged entity should not have more than 40% of the market share (latest TRAI recommendation proposes to reduce this to 30%).
3.2. A single entity cannot have more than 10 % share in two different telecom companies operating in the same circle.
3.3. FDI in a company should not exceed 74%.
3.4. The number of operators in a circle post merger should not fall below 4.
3.5. The service provider must have operated for a period of three years before considering any sort of merger.
3.6. The merged entity should not hold more than 14.4 MHz spectrum for GSM services and 10 MHz for CDMA services.
3. Factors driving M&A in the Indian Telecom Industry
4.7. The inclusion of internet (including broadband) and cable services in the telecom sector.
4.8. Deregulation in the telecom sector.
4.9. Telecos wish to achieve economies of scale and improve margins.
4.10. Many foreign telecom heavyweights such as Vodafone and British telecom are reentering in the Indian market... [continues]
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