Telecommunication industry have grown significantly in recent years. Deregulation, advent of new technologies and inclusion of new services boosted this growth.
the first deal took place in 1998 between max group of delhi and hutchison hong kong. acquisition hutch india by vodafone 2006 has been an important one. there are certain regulatory rules pertaining to mergers acquisitions the indian telecommunications sector.
Mergers and acquisitions in the telecommunication industry have grown by substantial proportions in India since the mid 1990s. Economic reforms undertaken in the 1990s in India opened up the telecom sector which used to be a predominantly state controlled one. Private investment in the telecom sector in India not only facilitated the rapid expansion of telecom services in the urban, as well as rural parts of India, it also provided the opportunity for mergers and acquisitions in this sector. Reasons for the growth of Indian telecommunication industry In recent times mergers and acquisitions in the Indian telecommunication industry have been driven by a few important factors –
The inclusion of internet (including broadband) and cable services in the telecom sector.
New technologies like wireless fixed phone services.
Deregulation in the telecom sector.
Important mergers and acquisitions in the Indian telecommunication industry The first merger and acquisition deal in the Indian telecom industry occurred in 1998 between Max Group of Delhi and Hutchison Group of Hong Kong. 41% of stakes of Orange services in Mumbai was acquired by Hutchison from Max for 560 million US Dollars. In the years that followed several other mergers and acquisitions took place in the telecommunications sector in India. Important ones among them include –
Acquisition of Command Cellular Services in Kolkata by Hutchison from Usha Martin in 2000.
Acquisition of 79.24% stakes of Aircel, Chennai by Sterling group from RPG group for Rs. 210 Crores in 2003.
Acquisition of 48% stakes in Idea cellular by Aditya Birla group from the Tata group in 2005.
Acquisition of Hutch services in India by Vodafone in 2006.
Benefits of mergers and acquisitions in the Indian telecommunication industry Mergers and acquisitions in the telecom sector in India provide certain benefits in terms of –
Infrastructure – Building infrastructure for telecommunications is not easy. Moreover it consumes much time. Mergers and acquisition provides access to infrastructure much easily.
Network – Benefits of existing network are available much easily through mergers and acquisitions
License – In certain region there may be restrictions on getting new license. In such a case mergers and acquisitions provide an option to run services in that region.
Rules related to mergers and acquisitions in the Indian telecommunication industry Certain regulatory and statutory norms pertaining to mergers and acquisitions in the Indian telecommunications sector are laid down by the Indian government and its authorized agencies. These include –
Mergers and acquisitions require approval from the Department Of Telecommunications (DOT)
Mergers are allowed in the same service area.
Mergers or acquisitions in a service area should not lead to less than 3 operators in that area.
Mergers and acquisitions should not lead to monopoly.
Last Updated on : 29th July 2013