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PROJECT REPORT ON MERGERS AND ACQUISITIONS IN TELECOM SECTOR IN INDIA SUBMITTED TO KUMAUN UNIVERSITY,NAINITAL
IN PARTIAL FULFILLMENT OF THE REQUIREMENT OF THE DEGREE OF MASTER OF BUSINESS ADMINISTRATION (2010-12)
UNDER THE GUIDANCE MR. HITESH PANT
SUBMITTED BY JYOTSANA BHATT ROLL NO: 101636 ENROLLMENTNO:063634 9
DEPARTMENT OF MANAGEMENT STUDIES, BHIMTAL KUMAUN UNIVERSITY, NAINITAL 2012
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ACKNOWLEDGEMENT
The writing of this project has been one of the significant academic challenges I have faced and without the support, patience, and guidance of the people involved, this task would not have been completed. It is to them I owe my deepest gratitude. It gives me immense pleasure in presenting this project report on MERGERS AND ACQUISITIONS IN TELECOM SECTOR IN INDIA This project would not have been possible without the help of librarian of our college who provided us the necessary books .And I also want to thank the H.O.D Prof. P.C. KAVIDAYAL of our college for his support and guidance through out the study. I acknowledge my thanks to MR. HITESH PANT, my project guide and all faculties, for their support ,constant advise, constructive criticism, able guidance ,constant encouragement and the right amount of personal touch ,which enabled the project in its present state. I would like to thank My Parents & Brother who directly or indirectly were the constant source of support which lead to successful completion of this report. Last but not the least I would thank Almighty for showering his blessings and helping me at each step.
(Jyotsana Bhatt) 2
DECLARATION
I hereby declare that project titled MERGERS AND ACQUISATIONS IN TELECOM SECTOR IN INDIA was done during the winter vacation after the third semester under the guidance of MR. HITESH PANT. This project has been undertaken as a partial fulfillment of the requirement for the award of the degree of MBA of KU Nainital. Further I declare that information & findings of this report are based on the data collected by me. It is my original work. I have neither copied from any report meant for any other degree / diploma course nor have submitted for award of any degree/ diploma or similar program elsewhere
SIGNATURE OF FACULTY GUIDE . MR. HITESH PANT
SIGNATURE OF STUDENT
. JYOTSANA BHATT Roll no 101636 Enrollment no - 0636349
EXECUTIVE SUMMARY
This project deals with the study of Mergers And Acquisitions In Telecom Sector which comprises of information on various types of merger and acquisition. This project, in a sense is an outgrowth of my learning experience. In my academic interaction with teacher, friends and practicing financial executives. I have understood the merger and acquisition mania to a great extent , the project in a way, represents a modest attempt to provide information on the subject.
(Jyotsana Bhatt)
CONTENTS
CHAPTER 1 INTRODUCTION... .06 IMPORTANCE OF ACQUISITIONS.............................10 CHAPTER 2 REVIEW OF LITERATURE... 11 CHAPTER 3 OBJECTIVES OF STUDY.17 CHAPTER 4 CHALLENGES & A..18 CHAPTER 5 RESEARCH ...23 METHODOLOGY.. REGULATION OF M & THE MERGERS &
PROBLEM STATEMENT..24 DATA COLLECTION & ANALYSIS 25 CHAPTER 6 MERGERS AND ACQUISITIONS THEORITICAL CONCEPTS 26
RISKS ASSOCIATED WITH MERGERS..39
CHAPTER 7 FINDINGS AND ANALYSIS. 41 CHAPTER CONCLUSIONS..4 9 BIBLIOGRAPHY 50
CHAPTER 1
INTRODUCTION OF MERGER & ACQUISITION
Mergers and acquisitions in telecom sector have become familiar in the majority of all the countries in the world. A large number of domestic telecom industries all over the world are engaged in merger and acquisition activities.Mergers and acquisitions encourage telecom industry to gain global reach and better synergy and allow large telecom industry to acquire the stressed assets of weaker industry. The word Telecommunication is a compound of the Greek prefix tele meaning 'far off', and the Latin communicare, meaning 'to share'. In its current usage, it refers to transmission of signals over a distance for the purpose of communication. In early days, communication between persons took place by means of drums, smoke signals, flags, etc. Emerging from such humble beginnings, the means now involve sophisticated high-speed, submarine optical cables laid on ocean floors and artificial satellites circling the Earth in space. As the demand for signal transmission has increased, the speed of transmission has also increased. Recently, scientists at Karlsruhe Institute of Technology in Germany have succeeded in transmitting 26 6
www.final-yearproject.com | www.finalyearthesis.com terabits (equal to about 700 DVDs or about 4 million average paperback books) of data per second at the distance of 50 kilometers. The telecommunications industry has impact on every aspect of our lives, from the simple reality of enabling telephonic communication between people in different locations to enabling supply-chains to work seamlessly across continents to create products and fulfill demands. Telecommunication services are now recognized as a key to the rapid growth and modernization of the economy and an important tool for socio-economic development for a nation. Telecommunications in India can be traced back to the 19th century when the British East India Company introduced telegraph services in India. The past two decades have been considered as the golden period for the telecommunications industry in India with exponential growth and development in terms of technology, penetration, as well as policy. All this has paralleled with the liberalization in this sector and huge investment by both domestic and foreign investors.
AN OVERVIEW
The modern system of communications in India started with the establishment of telegraph network. In order to ensure telegraph networks exclusivity and establish government control over electronic communications, various telegraph statutes were enacted by the Government of India which laid the foundation of the present regulatory framework governing telecommunications (both wired and wireless). In early days, India witnessed increasing number of wired telephone connections. Even when wireless communication was introduced in the form of cellular phones, it was not immediately accepted by the Indian masses, mainly on account of high price of cellular phones as well as high tariff structure prevalent at that point in time. Gradually, with the price of cellular handset as well as mobile (wireless) tariff reducing there was increasing adoption of wireless communications. Today the Indian telecom industry is already witnessing the lowest telecom tariff globally. Like elsewhere, telecommunications in India started as a state monopoly. In the 1980s, telephone services and postal services came under the Department of Posts and Telegraphs. In 1985, the government separated the Department of Post and created the Department of Telecommunications (DoT). As part of early reforms, 7
www.final-yearproject.com | www.finalyearthesis.com the government set up two new public sector undertakings: Mahanagar Telephone Nigam Limited (MTNL) and Videsh Sanchar Nigam Limited (VSNL). MTNL looked after telecommunications operations in two megacities, Delhi and Mumbai. VSNL provided international telecom services in India. DoT continued to provide telecommunications operations in all regions other than Delhi and Mumbai. It is important to note that under this regime, telecommunication services were not treated to be a necessity that should be made available to all people but rather a luxury possible for select few. In the early 1990s the Indian telecom sector, which was owned and controlled by the Indian government, was liberalized and private sector participation was permitted through a gradual process2. First, telecom equipment manufacturing sector was completely deregulated. The government then allowed private players to provide value added services (VAS) such as paging services. In 1994, the government unveiled the National Telecom Policy 1994 ( NTP 1994). NTP 1994 recognized that existing government resources would not be sufficient to achieve telecom growth and hence private investment should be allowed to bridge the resource gap especially in areas such as basic services. As markets and telecom technologies started converging and the differences between voice (both fixed and wireless) and data networks started blurring, the need for developing the modern telecom network became an immediate necessity. Accordingly, private sector participation was allowed in basic services.The government anticipated that a major part of the growth of the countrys GDP would be reliant on direct and indirect contributions of the telecom sector and accordingly the need for a comprehensive and forward looking telecommunications policy was felt. This then paved way for New telecom Policy 1999 (NTP 1999) which largely focused on creating an environment for attracting continuous investment in the telecom sector and allowed creation of communication infrastructure by leveraging on technological development. The main objectives and targets of NTP 1999 were as follows: Availability of affordable and effective communications for citizens; Strive to provide a balance between the provision of universal service to all uncovered areas, including the rural areas and the provision of high-level services capable of meeting the needs of the countrys economy; Create a modern and efficient telecommunications infrastructure taking into account the convergence of IT, media, telecom and consumer; 8
www.final-yearproject.com | www.finalyearthesis.com Protect the defense and security interests of the country.
NTP 1999 allowed private operators providing cellular and basic services to migrate from a fixed license fee regime to a revenue sharing regime which made it financially viable for such operators to function in the market. Most importantly, the government recognized the necessity to separate the government's policy wing from its operations wing so as to create a level playing field for private operators. Accordingly the NTP 1999 directed the separation of the policy and licensing functions of DoT from the service provision functions. The Government corporatized the operations wing of DoT in October 2000 and named it as Bharat Sanchar Nigam Limited (BSNL) which operates as a public sector undertaking. Thereafter in 2002, the monopoly of VSNL also came to an end. 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
&
Acquisitions
In
The
IndianTelecommunication 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
www.final-yearproject.com | www.finalyearthesis.com 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.
Amalgamations
In March 2011, the Vodafone Group announced that it would buy 33 percent stake in its Indian joint venture for about 5 billion dollars after the Essar Group sold its holding and exited Vodafone. Healthcare giant Piramal Group too, bought about 5.5 percent in the Indian arm of Vodafone for about 640 million dollars. This brings Vodafones current stake to about 75 percent.
IMPORTANCE OF THE STUDY

The factors inducing mergers and acquisition include technological progress, excess capacity, emerging opportunities and deregulation of geographic, functional and product restrictions. It may also bring the performance of telecom sector.
The following are the important aspects for staying in the market:
Competition from global majors. Competition from new Indian telecom industries. Disinter mediation and competition resulting into pressure or spread. Qualitative change in the industries paradigm. The competencies required from a would be sharper information technology and knowledge centric. 10
www.final-yearproject.com | www.finalyearthesis.com In order to compete with the new entrants effectively, Indian telecom industries need to posses matching financial muscle, as a fair competition is possible only among the equal. If Indian telecom industries are to be made more effective, efficiency and comparable with their counterparts from abroad, they would need to be more capitalized, automated and technology oriented, even while strengthening their internal operations and systems. Further in order to make them comparable with their competitors from abroad with regard to the size of their capital and asset base, it would be necessary to structure these industries. Merger and acquisitions are considered useful to achieve the requisite size in the short run.
CHAPTER 2
REVIEW OF LITERATURE Review of Previous Study
Market Measures-Based Studies Gallet (1996) examined the relationship between mergers in the U.S. steel industry and the market power. The study employed New Empirical Industrial Organization approach which estimates the degree of market power from a system of demand and supply equations. The study analyzed yearly observations over the period between 1950 and 1988 and results have revealed that in the period of 1968 to 1971 merges did not have a significant effect on market power in the steel industry, whereas mergers in 1978 and 1983 did slightly boost market power in the steel industry. Rau and Vermaelen (1998) investigated the controversial issue of under performance after mergers and over performance after tender offers through examining the effect of firm size and low book-to-market value on the post- acquisition performance to pinpoint reasons behind under performance in mergers and over-performance in 11
www.final-yearproject.com | www.finalyearthesis.com tender offers if any. They also investigated the effect of the payment method (Cash/Stock) on the post-acquisition performance. The study employed a sample of 3169 mergers and 348 tender offers and concluded that after adjusting for firm size and book-to-market ratio, acquirers in mergers under perform by a significant 4% over three years, while acquirers in tender offers earn a significant positive abnormal return of 9% on average. A fact that destroys the belief that under-performance is due to un-adjusting for book-to-market ratio. The study has interpreted underperformance as a result of decision makers actions, where they over extrapolate the past performance of the bidder with low book-to-market ratios "glamour firm" and overestimate its abilities and hence approve the acquisition. On the other hand, value bidders companies with poor track record or with high book-to-market ratio tend to be more prudent and are not motivated by hubris when approving an acquisition. The study failed to interpret the effect of methods of payment in cases where the long-run abnormal return is negative in share-financed acquisition and positive in cash financed acquisition. However, the study did not provide interpretation for the overperformance of tender offers compared to mergers. Tse and Soufani (2001) examined the wealth effects on both acquiring and acquired firms using a sample of 124 transactions over the period 1990 to 1996. The sample is sub-divided into two merger eras to examine the effect of the prevailing economic performance on the abnormal returns; the first era is Low Merger Activity from 1990 to 1993 which is a trough period and includes 65 transactions; and the second era is High Merger Activity Era from 1994 to 1996 which is a booming period, it includes 59 transactions. The basic testing tool used is "event-study" to calculate cumulative abnormal returns for both eras. The results have indicated that the returns on successful bids in HMAE are positive while returns in LMAE are negative. Marginally, returns in the HMAE are better than those in LMAE. This result has suggested a link between the wealth effect and the economic conditions. Another important result is that usually gains to target companies (acquired) are mostly positive while those to bidders (acquirer) are debatable. Choi and Russell (2004) investigated whether mergers and acquisitions in the construction sector in U.S. make positive contributions to the performance and determined the factors that may affect post-mergers and acquisitions performance as: method of payment, acquisition timing and transaction size. The study analyzed 171 12
www.final-yearproject.com | www.finalyearthesis.com transactions that occurred between 1980 and 2002 using the cumulative abnormal returns to indicate improvement in performance. The results have revealed that (i) the number of acquisition transactions increased dramatically during the late 1990s, (ii) firms experienced insignificant improved performance, in other words, they just reached break even after mergers, and (iii) no evidence was found that either acquisition time, method of payment, or target status had an influence on the reported performance and that related diversifications perform slightly better than unrelated diversifications. The analysis covered a long time span of about 22 years which increased the reliability of the results. Unlike the majority of studies that supported the method of payment as a primary factor influencing mergers and acquisitions, Choi and Russell (2004) found no evidence to support such results. The study of Andre et al. (2004) examined long-run performance of mergers and acquisitions in Canada and investigated the main determinants of post-acquisition abnormal performance to determine the sources of value creation or value destruction in Canadian M&A. The studys sample comprises 267 events of mergers and acquisitions between 1980 and 2000 making up 176 companies to investigate the effects of (i) method of payment, (ii) book-to-market value of the bidder, and (iii) local and cross-border deals on the long-run performance. The analysis covered three years after the transaction using mean calendar-time abnormal returns to measure the magnitude and reliability of abnormal returns. The results have shown that Canadian acquirers significantly under-perform over the three-year post-event period. After examining possible explanations for the long-run performance of M&A, the study found that the method of payment where stock-financed M&A under-perform relative to cash-financed M&A, glamour acquirers under perform relative to value acquirers, and finally, crossborder deals perform poorly in the long- run. The study did not compare post-merger performance with a benchmark or control group of similar industries to account for industry effects, and this was the main drawback. Therefore, the negative abnormal returns could be due to industry conditions. Yook (2004) tested the impact of acquisition on the acquiring firms financial performance by comparing pre and post-acquisition Economic Value Added relative to the industry average. The study based on a cross-sectional variation in EVA performance according to the following transaction characteristics: (i) types of acquisition, (ii) methods of payment, and (iii) business similarity. The sample 13
www.final-yearproject.com | www.finalyearthesis.com comprises 75 of the largest acquisitions occurring during 1989 to 1994 in the United States. The results have concluded that acquiring firms experience significantly deteriorating financial performance after the acquisitions. When calculating industryadjusted EVA, the difference is indiscernible, hence, the decline in raw EVA is grounded by industry effects. Tender offers consistently earn larger EVA than do mergers. However, there is no difference if EVA is calculated without adjusting the premium. Hence, larger premiums paid in tender offers can be justified by higher operating performance. Unfortunately, the study failed to find a relationship between industry-adjusted EVA and types of acquisition, methods of payment, and business similarity. However calculating EVA is a difficult process and still has a dispute in the accounting literature. Megginson et al. (2004) aim at investigating the relationship between the long-term postmerger performance and the following factors: (i) the degree of corporate focus, (ii) method of payment, (iii) the impact of target management attitude, (iv) the impact of time period of the merger, and (v) the impact of (glamour/value) acquirers. The sample consists of 204 strategic mergers completed in the period 1977-1996. In examining the long-term performance, the study carried out three tests; first, comparing the long-term stock performance; abnormal returns, of merging firms with a portfolio of firms, second, comparing pre and post-merger operating cash flows to the same control group, and finally, comparing sample and control pre-merger and post-merger discounts and premiums in market-to-book values. The results have indicated that the primary determinant of long-term performance is the degree of change in corporate focus. On average, 10% decline in the focus results in (a) 9% loss in relative stockholder wealth, (b) 4% discount in firm value, and (c) 1.2% decline in operating cash flow by the third post-merger year. Cash-financed mergers outperformed stock-financed mergers in the operating performance. There is no significant relationship between managerial resistance and long-term performance. Time period has no effect on the long-term post-merger performance. No evidence was found to support that glamour outperform value acquirers. Yuce and Ng (2005) investigated the effect of merger announcements of Canadian firms on the abnormal returns. The sample consists of all Canadian mergers that occurred between 1994 and 2000 making up 1361 acquirer companies and 242 target 14
www.final-yearproject.com | www.finalyearthesis.com companies representing industrial product companies, oil and gas companies, consumer product sectors and the rest of the sample is scattered over 38 industries. Abnormal returns have been used for both the acquiring and target companies in an effort to support or reject the results of American studies that report negative abnormal return for acquiring firms and positive abnormal return for target firms. The results have indicated negative results in contrast to U.S. studies (for example; Andre et al., 2004). Yuce and Ng (2005) argued that both the target and the acquiring company shareholders earn significant positive abnormal returns, but it is lower than what had reported in previous study of Megginson et al. (2004) on Canadian companies. This means that abnormal returns appear to be decreasing through time. The results of Yuce and Ng (2005) suggest that (i) there are significant and positive cumulative abnormal returns to acquirers buying private firms with stock rather than public ones, (ii) no significant difference is found between public and private targets when paid in cash, (iii) there is higher risk for acquiring private firms than public ones, (iv) firms tend to pay less in stocks for private firms, and (v) differences in Canadian industry, capital markets, and regulations may justify the difference in the Canadian experience. It can be argued that the study did not test the effect of industry type on the acquisition price. Additionally, the study examined the performance for a period of 40 days which is a very short period to examine the performance; therefore the results have lack of generalization. Accordingly, an investigation over a long-run is needed to determine whether the positive abnormal returns in the shortrun would reverse in the long-run or continue as positive. Kling (2006) carried out a study to judge the successfulness of the mergers wave in Germany and to analyze the effect of mergers on the macro level taking into consideration variables that might drive mergers such as: economics of scale, macro economic conditions, success of former mergers and market structure. The study choose a sample of 35 leading German companies that experienced mergers over the period from the early 1870s to the beginning of the First World War in 1914 covering a period of 44 years. The results reveal that the first German wave of merger started around 1898 accompanied by the introduction of the new exchange law in 1896. The vector regression model used was unable to find out that mergers were not successful through the whole period albeit periods of successful mergers, hence, this issue has been identified using rolling regressions. From 1898 to 1904, mergers affected total 15
www.final-yearproject.com | www.finalyearthesis.com stock returns positively in all industries except for banks. Despite this fact, managers imitated the merger wave in the industrial companies without assessing the successfulness of this activity on the banking sector. The study has cons and pros; where the period covered in the study was long enough to conclude considerable results. Moreover, categorizing the sample according to industry type provides insights on the effects of mergers across sectors rather than generalizing results with no evidence. On the other hand, the study is based on the macro level which in turn might affect results of analyzing mergers on a micro level of corporate performance.
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www.final-yearproject.com | www.finalyearthesis.com Table 1: Summary of Market Measures-Based Studies Study Gallet (1996) Rau & Vermaelen (1998) Objective(s) Examine the relationship between mergers in the U.S. steel industry and the market power. Identify the reason(s) behind under performance in mergers & overperformance in tender offers as well as examining the effect of the payment method on post acquisition performance. Test the effect of M&A on the abnormal returns for both the acquired and the acquiring firms. Measures Used Market Power Book-toMarket Values Results Results have suggested that mergers slightly boost market power in steel industry. Results have indicated that firms in mergers & tender offers under-perform their benchmarks by statistically significant 4% in the three years following the acquisitions.
Tse & Soufani (2001) Choi & Russell (2004)
Andre et al. (2004)
Cumulative Results have indicated that the returns on Abnormal successful bids in high merger activity era are +ve while returns in low merger Returns activity era are -ve. Shows link b/w the Examine the effect of M&A in the wealth effect & the economic conditions. construction sector in the U.S. on Cumulative Results have reported that firms experience firms' performance & investigating Abnormal insignificant improved performance. No factors that may affect post M&A evidence was found that either acquisition Returns performance. time, method of payment, or target status has an impact on the reported performance. Explore the effect of Canadian Mean Results have shown that Canadian mergers on long-term performance Calendaracquirers significantly under-perform over and identifying the factor(s)behind Time the three-year postevent period. value creation or value destruction. Abnormal Return Test the effect of acquisition on the acquiring firms' financial performance. Economic Value Added Abnormal Return, Market-toBook Values Results have reported that firms experience significantly deteriorating operating performance after the acquisitions. Results have indicated the following: (i) the primary determinant of long-term performance is the degree of change in corporate focus, (ii) on average, 10% decline in the focus results in 9% loss in relative stockholder wealth, 4% discount in firm value, & 1.2% decline in operating cash flow by the third postmerger year, Results have indicated that both the target and the acquiring company shareholders earn significant +ve abnormal returns. From 1898 to 1904 mergers affected stock returns positively in all industries except for banks. 17
Yook (2004)
Megginson Examine the impact of the et al. followings & long term (2004) performance: (i) degree of corporate focus, (ii) method of payment, (iii) target management attitude, (v) time period of the merger,(iv) (glamour/value) acquirers. Yuce & Ng (2005) Kling (2006) Investigate the effect of mergers announcements of Canadian firms on the abnormal returns. Investigate the successfulness of the mergers wave in Germany.
Abnormal Return TotalStock Return
CHAPTER 3
OBJECTIVES OF STUDY
The main purpose of the study is to identify and to know how merger and acquisition takes place in telecom sectors and is significance in growth of telecom sectors domestic as well as for the international telecom industries concern. Objectives of the study are briefly stated below: To critically analyze the impact mergers and acquisitions on the operating performance of the firm in India. To identify how through mergers and acquisitions in the telecom sector, the industries look for strategic benefits in the telecom sector and also how they enhance their customer base. To know how Mergers and acquisitions help in ensuring efficiency, profitability and synergy. And also help to form & grow shareholder value.
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CHAPTER 4
CHALLENGES & REGULATION OF M & A Challenges and opportunities in Indian telecom sector
The telecom sector has been one of the fastest growing sectors in the Indian economy in the past 4 years. This has been witnessed due to strong competition that has brought down tariffs as well as simplification of policy environment that has promoted healthy competition among various players.. The mobile sector alone has been growing rapidly and has emerged as the fastest growing market in the whole worlds. Currently of a size nearing 70 million (GSM and CDMA), this sector is expected to reach a size of nearly 200 million subscribers by financial year 2008. The government has eased the rules regarding inter circle and intra circle mergers. This has led to a slew of mergers and acquisitions in the recent past. Also as the sector is moving closer to maturity, further consolidation is a reality and this will lead to the survival of more profitable players in this segment. In order to further promote the use of Internet in the country the government is takingproactive steps to develop this sector with the help of the various players in this segment.For this purpose, the use of broadband technology is being mooted and this will go a long way in improving the productivity of the Indian economy as well as turn out to be the next big opportunity for telecom companies after the mobile communications segment. Non-voice services and VAS are the gold mines. The big takeoff is expected with the rollout of 3G services in early 2007, once the spectrum issues are sorted out. Internet users base fast reaching near the English speaking population base. Local language and content required for further growth. Infrastructure equipment cost is down to a fraction of what prevailed just a few years ago.Operators can plan better expansion plan now. Increased viability for the operators to expand to semi-urban and rural markets, hence, accelerate growth further Its not without reason that India is tipped to be the worlds third-larges economy by 2050! No wonder if it happens much earlier Investors can look to capture the gains of 19
www.final-yearproject.com | www.finalyearthesis.com the Indian telecom boom and diversify their operations outside developed economies that are marked by saturated telecom markets and lower GDP growth rates. At a time when global telecom majors are struggling to cope with their losses and the rollout of 3G networks, which has been a non-starter for close to a year now; India, with its telecom success story, represents an attractive and lucrative destination for investment.
Regulatory Framework
The Telecom Regulatory Authority of India (TRAI) was set up in March 1997 as a regulator for Telecom sector. The TRAIs functions are recommendatory, regulatory and tariff setting in telecom sector. Telecom Disputes Settlement and Appellate Tribunal (TDSAT) came into existence in May, 2000. TDSAT has been empowered to adjudicate any dispute between a licensor and a licensee between two or more service providers between a service provider and a group of consumers hear and dispose of appeal against any direction, decision or order of TRAI Tariffs for telecommunication services have evolved from a regime where tariffs were determined by Telecom Regulatory Authority of India to a regime where tariffs are largely under forbearance. TRAI intervenes by regulating the tariffs for only those services, the markets of which are not competitive. Universal Service Obligation Fund (USOF) exclusively for meeting the Universal Service Obligation was established in April, 2002. The Universal Service Levy is presently 5 per cent of the Adjusted Gross Revenue (AGR) of all telecom service providers except the pure value added service providers like Internet, Voice Mail, EMail service providers etc. Indian Telegraph Act has been amended in October2006 to provide support for all telegraph services including mobile and broadband to bridge the digital divide.
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www.final-yearproject.com | www.finalyearthesis.com With the introduction of the Unified Access Licensing Regime, operators can offer telecom access services to consumers in a technology neutral manner, subject to fulfilling certain conditions. Introduction of this regime has also broken the legal/regulatory impasse between the cellular and basic service providers. Issuance of Intra-Circle Merger and Acquisition Guidelines provide investors an opportunity to take stakes in existing telecom operations.
Government Initiatives
The Government has taken the following main initiatives for the growth of the Telecom Sector: All telecom services have been opened up for free competition for unprecedented growth 217 (Information Technology Agreement) ITA-I items are at zero Customs Duty. Specified capital goods and all inputs required to manufacture ITA-I, items are at zero Customs Duty Availability of low cost mobile handsets In April 2004, license fee for Unified Access Service Providers (UAS) was reduced by 2 per cent License fee for infrastructure Provider-II reduced from 15 per cent to 6 per cent of the Adjusted Gross Revenue and spectrum charges between 2 to 4 per cent in June 2004 Entry fee for NLD licenses was reduced to Rs. 2.5 Crore from Rs. 100 Crore. Entry fee for ILD reduced to Rs. 2.5 Crore from Rs. 25 Crore Lease line charges have been reduced to make the bandwidth available at competitive prices to facilitate growth in IT enabled services One India plan i.e. single tariff of Re. 1/-per minute to anywhere in India was introduced from 1st March 2006 by the Public Sector Undertakings. This tariff was emulated by most of the private service providers also. This scheme has led to death of distance in telecommunication and is going to be instrumental in promoting National Integration further The robust telecom network has also facilitated the expansion of BPO industry that is having 500,000 employees now and adding 400 employees per day. Annual license fee for National Long Distance (NLD), International Long Distance 21
www.final-yearproject.com | www.finalyearthesis.com (ILD), Infrastructure Provider-II, VSAT commercial and Internet Service Provider (ISP) with internet telephony (restricted) licenses was reduced to 6 per cent of Adjusted Gross Revenue (AGR) with effort from Jan 2006. The Governments policy is neutral on use of technology by telecom service providers subject to availability of scarce resources such as spectrum etc. Licence Fees 6-10 per cent of Adjusted Gross Revenue (AGR)
Foreign Direct Investment Policy Foreign Direct Investment (FDI) was permitted in the telecom sector beginning with the telecom manufacturing segment in 1991 - when India embarked on economic liberalisation. FDI is defined as investment made by non-residents in the equity capital of a company. For the telecom sector, FDI includes investment made by NonResident Indians (NRIs), Overseas Corporate Bodies (OCBs), foreign entities, Foreign Institutional Investors (FIIs), American Depository Receipts (ADRs)/Global Depository Receipts (GDRs) etc. Present FDI Policy for the Telecom sector In Basic, Cellular Mobile, National Long Distance, International Long Distance, Value Added Services and Global Mobile Personal Communications by Satellite, FDI is limited to 49 per cent (under automatic route) subject to grant of licence from the Department of Telecommunications and adherence by the companies (who are investing and the companies in which investment is being made) to the licence conditions for foreign equity cap and lock-in period for transfer and addition of equity and other license provisions. Foreign Direct Investment up to 74 per cent permitted, subject to licensing and security requirements for the following: - Internet Service (with gateways) - Infrastructure Providers (Category II) - Radio Paging Service FDI up to 100 per cent permitted in respect to the following telecom services: - ISPs not providing gateways (Both for satellite and submarine cables) - Infrastructure Providers providing dark fibre (IP Category I) 22
www.final-yearproject.com | www.finalyearthesis.com - Electronic Mail - Voice Mail The above is subject to the following conditions: - FDI up to 100 per cent is allowed subject to the condition that such companies would divest 26 per cent of their equity in favour of Indian public within 5 years, if these companies are listed in other parts of the world. - The above services would be subject to licensing and security requirements, wherever required. - Proposals for FDI beyond 49 per cent shall be considered by Foreign Investment Promotion Board (FIPB) on a case-to-case basis. In the manufacturing sector 100 per cent FDI is permitted under the automatic route. In Basic, Cellular Mobile, paging and Value Added service, and Global Mobile Personal Communications by Satellite, FDI is permitted up to 49 per cent (under automatic route) subject to grant of license from Department of Telecommunications Foreign direct investment up to 74 per cent permitted, subject to licensing and security requirements for the Internet Service (with gateways), Infrastructure Providers (category-II), Radio Paging Service FDI up to 100 per cent permitted in respect of - ISPs not providing gateways (both for satellite and submarine cables), - Infrastructure Providers providing dark fibre (IP Category I); - Electronic Mail; and - Voice Mail FDI up to 49 per cent is also permitted in an investment company, set up for making investment in the telecom companies licensed to operate telecom services. Investment by these investment companies in a telecom service company is treated as part of domestic equity and is not set of against the foreign equity cap. Manufacturing - 100 per cent FDI is permitted under automatic route. FDI is subject to the following conditions FDI up to 100 per cent is allowed subject to the conditions that such companies would divest 26 per cent of their equity in favour of Indian public in 5 years, if these companies are listed in other parts of the world. 23
www.final-yearproject.com | www.finalyearthesis.com The above services would be subject to licensing and security requirements, Wherever required. Proposals for FDI beyond 49 per cent shall be considered by FIPB on case to case basis
CHAPTER 5
RESEARCH METHODOLOGY
Research refers to a search for knowledge. Research is a scientific search and systematic search for pertinent information on a specific topic. In fact, research is an art of scientific investigation. The Advanced Learners Dictionary of Current English lays down that A Research is a careful investigation or inquiry, especially through search for new facts in any branch of knowledge. It is a systematized effort to gain more knowledge.
Significance Of Research
All progress is born of inquiry. Research inculcates scientific and inductive thinking and it promotes the development of logical habits of thinking and organization. Research is equally important for social scientists in studying social relationships and in seeking answers to various social problems.
TYPES OF RESEARCH:
1) Descriptive Vs. Analytical: Descriptive research comprises surveys and fact-finding enquiries of different types. The main objective of descriptive research is describing the state of affairs as it prevails at the time of study. The most distinguishing feature of this method is that the researcher has no control over the variables here. 2) Applied Vs. Fundamental: Research can also be applied or fundamental research. An attempt to find a solution to an immediate problem encountered by a firm, an industry, a business organisation, or the society is known as applied research. Researchers engaged in such researches aim at drawing certain conclusions confronting a concrete social or business 24
www.final-yearproject.com | www.finalyearthesis.com problem. On the other hand, fundamental research means gathering knowledge for knowledges sake is termed pure or basic research.
3) Quantitative Vs. Qualitative: Quantitative research relates to aspects that can be quantified or can be expressed in terms of quantity. It involves the measurement of quantity or amount. Statistical method is adopted for this research such as correlation, regressions, time series analysis, etc. Whereas, qualitative research is concerned with qualitative phenomenon, or more specifically, the aspects relating to or involving quality or kind. Similar projective methods.
4) Conceptual Vs. Empirical:

A research related to some abstract idea or theory is known as conceptual research. Generally philosophers and thinkers use it for developing new concepts or for reinterpreting the existing ones. Empirical research relies on observation or experience with hardly any regard for theory and system. Such research is data based.
PROBLEM STATEMENT
Since 1991, the process of liberalization, privatization and globalization initiated by the government of India has influenced the functioning and governance of Indian companies which has forced Indian companies to refocus their strategies. As a sequel to this, Mergers and acquisitions are becoming a normal phenomenon. M & A are not new in Indian economy. In the past also companies have used mergers and acquisitions strategies to grow. Having spread their wings haphazardly during the days of controlled regime. Indian corporate houses are now refocusing on the lines of core competence, market share and global competitiveness. This process of refocusing has been hastened by the arrival of foreign competitors. Thus, leading corporate houses have undertaken restructuring exercise. M & A is one of the most effective methods of restructuring and has, therefore, become an integral part of the long-term business strategy of corporate enterprises. 25
DATA COLLECTION AND ANALYSIS

Data collection is the most essential aspect of any research because the whole result of research depends on the data & information. How much primary & secondary data must be collected, and which is the source; these are many related aspects must be decided well in advance. In any research there are two distinct types of data: Primary data:The primary data was collected through personal observation like questionnaire, interviews etc. Secondary data: It means to collect data which is already available or have been used by someone.
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CHAPTER 6
MERGERS AND ACQUISITIONS THEORITICAL CONCEPTS
MERGERS A merger occurs when two or more companies combines and the resulting firm maintains the identity of one of the firms. One or more companies may merger with an existing company or they may merge to form a new company. Usually the assets and liabilities of the smaller firms are merged into those of larger firms. Merger may take two forms1. Merger through absorption 2. Merger through consolidation. Absorption Absorption is a combination of two or more companies into an existing company. All companies except one loose their identify in a merger through absorption. Consolidation A consolidation is a combination if two or more combines into a new company. In this form of merger all companies are legally dissolved and a new entity is created. In consolidation the acquired company transfers its assets, liabilities and share of the acquiring company for cash or exchange of assets. ACQUISITIONS A fundamental characteristic of merger is that the acquiring company takes over the ownership of other companies and combines their operations with its own operations. An acquisition may be defined as an act of acquiring effective control by one company over the assets or management of another company without any combination of companies.
TAKEOVER
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www.final-yearproject.com | www.finalyearthesis.com A takeover may also be defined as obtaining control over management of a company by another company.
DISTINCTION BETWEEN MERGERS AND ACQUISITIONS

Although they are often uttered in the same breath and used as though they were synonymous, the terms merger and acquisition mean slightly different things. When one company takes over another and clearly established itself as the new owner, the purchase is called an acquisition. From a legal point of view, the target company ceases to exist, the buyer "swallows" the business and the buyer's stock continues to be traded.
In practice, however, actual mergers of equals don't happen very often. Usually, one company will buy another and, as part of the deal's terms, simply allow the acquired firm to proclaim that the action is a merger of equals, even if it's technically an acquisition. Being bought out often carries negative connotations, therefore, by describing the deal as a merger, deal makers and top managers try to make the takeover more palatable.
A purchase deal will also be called a merger when both CEOs agree that joining together is in the best interest of both of their companies. But when the deal is unfriendly - that is, when the target company does not want to be pu rchased - it is always regarded as an acquisition.
1.2 TYPES OF MERGERS Mergers can be a distinguished into the following four types:1. Horizontal Merger 2. Vertical Merger 3. Conglomerate Merger 4. Concentric Merger Horizontal Merger
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www.final-yearproject.com | www.finalyearthesis.com Horizontal merger is a combination of two or more corporate firms dealing in same lines of business activity. Horizontal merger is a co centric merger, which involves combination of two or more business units related to technology, production process, marketing research, development and management
Vertical Merger Vertical merger is the joining of two or more firms in different stages of production or distribution that are usually separate. The vertical Mergers chief gains are identified as the lower buying cost of material. Conglomerate Merger Conglomerate merger is the combination of two or more unrelated business units in respect of technology, production process or market and management. Concentric Merger Concentric merger are based on specific management functions where as the conglomerate mergers are based on general management functions. If the activities of the segments brought together are so related that there is carry over on specific management functions. Such as marketing research, Marketing, financing, manufacturing and personnel. 1.3ADVANTAGES OF MERGERS AND ACQUISITIONS
1)
Accelerating a company's growth, particularly when its internal growth is constrained due to paucity of resources. Resources can be acquired from outside through mergers and acquisitions. For entering in new products/markets, the company may lack technical skills and may require special marketing skills and a wide distribution network to access different segments of markets.
2) 3)
4)
The company can acquire existing company or companies with requisite infrastructure and skills and grow quickly. Enhancing profitability because a combination of two or more companies may result in more than average profitability due to cost reduction and efficient utilization of resources. This may happen because of:29
5)
www.final-yearproject.com | www.finalyearthesis.com 1. GROWTH OR DIVERSIFICATION: Companies that desire rapid growth in size or market share or diversification in the range of their products may find that a merger can be used to fulfill the objective instead of going through the tome consuming process of internal growth or diversification. The firm may achieve the same objective in a short period of time by merging with an existing firm. In addition such a strategy is often less costly than the alternative of developing the necessary production capability and capacity. If a firm that wants to expand operations in existing or new product area can find a suitable going concern. It may avoid many of risks associated with a design; manufacture the sale of addition or new products.. SYNERGY: Implies a situation where the combined firm is more valuable than the sum of the individual combining firms. It refers to benefits other than those related to economies of scale. Operating economies are one form of synergy benefits. But apart from operating economies, synergy may also arise from enhanced managerial capabilities, creativity, innovativeness, R&D and market coverage capacity due to the complementarity of resources and skills and a widened horizon of opportunities Merger may result in financial synergy and benefits for the firm in many ways:-
i. ii.
By eliminating financial constraints By enhancing debt capacity. This is because a merger of two companies can bring stability of cash flows which in turn reduces the risk of insolvency and enhances the capacity of the new entity to service a larger amount of debt
iii.
By lowering the financial costs. This is because due to financial stability, the merged firm is able to borrow at a lower rate of interest.
Other Motives For Mergers

Merger may be motivated by other factors that should not be classified under synergism. These are the opportunities for acquiring firm to obtain assets at bargain 30
www.final-yearproject.com | www.finalyearthesis.com price and the desire of shareholders of the acquired firm to increase the liquidity of their holdings.
1. Purchase Of Assets At Bargain Prices Mergers may be explained by opportunity to acquire assets, particularly land mineral rights, plant and equipment, at lower cost than would be incurred if they were purchased or constructed at the current market prices. If the market price of many socks have been considerably below the replacement cost of the assets they represent, expanding firm considering construction plants, developing mines or buying equipments often have found that the desired assets could be obtained where by heaper by acquiring a firm that already owned and operated that asset. Risk could be reduced because the assets were already in place and an organization of people knew how to operate them and market their products. 2.Increased Managerial Skills or Technology Occasionally a firm will have good potential that is finds it unable to develop fully because of deficiencies in certain areas of management or an absence of needed product or production technology. If the firm cannot hire the management or the technology it needs, it might combine with a compatible firm that has needed managerial, personnel or technical expertise. Of course, any merger, regardless of specific motive for it, should contribute to the maximization of owners wealth.
2. Acquiring New Technology

To stay competitive, companies need to stay on top of technological developments and their business applications. By buying a smaller company with unique technologies, a large company can maintain or develop a competitive edge. i. Economy Of Scale: This refers to the fact that the combined company can often reduce its fixed costs by removing duplicate departments or operations,
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www.final-yearproject.com | www.finalyearthesis.com lowering the costs of the company relative to the same revenue stream, thus increasing profit margins. ii. Operating Economies: Arise because, a combination of two or more firms may result in cost reduction due to operating economies. In other words, a combined firm may avoid or reduce over-lapping functions and consolidate its management functions such as manufacturing, marketing, R&D and thus reduce operating costs iii. Increased Revenue Or Market Share: This assumes that the buyer will be absorbing a major competitor and thus increase its market power capturing increased market share) to set prices. iv. Cross-Selling: For example, a bank buying a stock broker could then sell its banking products to the stock broker's customers, while the broker can sign up the bank's customers for brokerage accounts. Or, a manufacturer can acquire and sell complementary products. (by
1.4 Procedure For Evaluating the decision or Merger & Acquisitions

The three important steps involved in the analysis of mergers and acquisitions are:-
1. Planning: Acquisition will require the analysis of industry-specific and firmspecific information. The acquiring firm should review its objective of acquisition in the context of its strengths and weaknesses and corporate goals. It will need industry data on market growth, nature of competition, ease of entry, capital and labour intensity, etc.
2. Search And Screening: Search focuses on how and where to look for
suitable candidates for acquisition. Screening process short-lists a few candidates from many available and obtains detailed information about each of them.
3. Financial Evaluation: A merger is needed to determine the earnings and

cash flows, areas of risk, the maximum price payable to the target company and the best way to finance the merger. In a competitive market situation, the current market value is the correct and fair value of the share of the target firm. The target firm will not accept any offer below the current market value of its share 32
3. MERGERS AND ACQUISITION IN INDIA
1.The Reliance BP deal

The much talked about Reliance BP deal finally came through in July 2011 after a 5 month wait. Reliance Industries signed a 7.2 billion dollar deal with UK energy giant BP, with 30 percent stake in 21 oil and gas blocks operated in India. Although the Indian governments approval on two oil blocks still remains pending, this still makes it one of the biggest FDI deals to come through in India Inc in 2011-12-31.
2.Essar Exits Vodafone

In March 2011, the Vodafone Group announced that it would buy 33 percent stake in its Indian joint venture for about 5 billion dollars after the Essar Group sold its holding and exited Vodafone. Healthcare giant Piramal Group too, bought about 5.5 percent in the Indian arm of Vodafone for about 640 million dollars. This brings Vodafones current stake to about 75 percent.
3.The Fortis Healthcare Merger

In September 2011, Indias second largest hospital chain, Fortis Healthcare (India) Ltd, announced that it will merge with Fortis Healthcare International Pte Ltd., the 33
www.final-yearproject.com | www.finalyearthesis.com promoters privately held company. This will make Fortis Asias top healthcare provider with the approximate total revenue pegged at Rs. 4,800 crore. Fortis India will buy the entire stake of the Singapore based Fortis International. This company is currently held by the Delhi-based Singh brothers (Malvinder Singh and Shivinder Singh).
4.iGate Acquires Majority Stake In Patni Computers

In May 2011, IT firm iGate completed its acquisition of its midsized rival Patni Computers for an estimated 1.2 billion dollars. For iGate, the main aim of this acquisition was to increase its revenue, vertical capability and customer base. iGate now holds an approximate stake of 82.5 percent in Patni computers, now called iGate Patni.
5.GVK Power Acquires Hancock Coal

In one of the biggest overseas acquisitions initiated by India in September 2011, Hyderabad-based GVK Power bought out Australias Hancock Coal for about 1.26 billion dollars. The acquisition includes a majority of the coal resources, railway line and port infrastructure of Hancock Coal, along with the option for long term coal supply contracts.
6.Essar Energys Stanlow Refinery Deal With Royal Dutch Shell

The Ruias flagship company for its oil business, Essar Energy completed its 350 million dollar acquisition of the UK based Stanlow Refinery of Shell in August 2011. In addition to a direct access to the UK market, Essar is planning to make optimum utilization of this deal with its 100 day plan to improve operations at the UK unit.
7.Aditya Birla Group To Acquire Columbian Chemicals

In June 2011, the Aditya Birla Group announced its completion of acquiring US based Columbian Chemicals, a 100 year old carbon black maker company for an estimated 875 million dollars. This will make the Aditya Birla Group one of the largest carbon black maker companies in the world, doubling its production capacity instantly.
8.Mahindra & Mahindra Acquires Ssangyong

In March 2011, Mahindra acquired a 70 percent stake in ailing South Korean auto maker Ssangyong Motor Company Limited (SYMC) at a total of 463 million dollars. This acquisition will see the Korean companys flagship SUV models, the Rexton II and the Korando C foray into the Indian market.
9.The Vedanta Cairn acquisition

December 2011 finally saw the completion of the much talked about Vedanta Cairn deal that was in the pipeline for more than 16 months. Touted to be the biggest deal for Indian energy sector, Vedanta acquired Cairn India for a neat 8.6 billion dollars. 34
www.final-yearproject.com | www.finalyearthesis.com Although the Home Ministry cleared the deal, it has highlighted areas of concern with 64 legal proceedings against Vedanta.
10.Adani Enterprises Takes Over Abbot Point Coal

In June 2011, Adani acquired the Australian Abbot Point Port for 1.9 billion dollars. With this deal, the revenues from port operations are expected to almost triple from 110 million Australian dollars to 305 million Australian dollars in 2011. According to Adani, this was amongst the largest port deals ever made.
4.MERGERS IN INDIAN TELECOM SECTOR

The number of mergers and acquisitions in Telecom Sector has been increasing significantly.Telecommunications industry is one of the most profitable and rapidly developing industries inthe world and it is regarded as an indispensable component of the worldwide utility and services sector.Telecommunication industry deals with various forms of communication mediums, for example mobile phones, fixed line phones, as well as Internet and broadband services. Currently, a slew of mergers and acquisitions in Telecom Sector are going on throughout the world. The aim behind such mergers is to attain competitive benefits in the telecommunications industry.The mergers and acquisitions in Telecom Sector are regarded as horizontal mergers simplybecause of the reason that the entities going for merger or acquisition are operating in the same industry that is telecommunications industry. In the majority of the developed and developing countries around the world, mergers andacquisitions in the telecommunications sector have become a necessity. This kind of mergersalso assits in creation of jobs. Both transnational and domestic telecommunications services providers are keen to try merger and acquisition options because this will help them in many ways. They can cut down on their expenses, achieve greater market share and accomplish market control.
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www.final-yearproject.com | www.finalyearthesis.com Mergers & acquisitions in the telecommunications sector have been showing a prosperoustrend in the recent past and the economists are advocating that they will continue to do so. The majority of acquisitions are the principal devices. Private sector investment and FDI (Foreign Direct Investment) have also boosted the growth of mergers and acquisitions in the telecommunications sector.Over the last few years, a phenomenal growth has been witnessed in the number of mergers andacquisitions taking place in the telecommunications industry. The reasons behind thisdevelopment include the following: Deregulation Introduction of sophisticated technologies (Wireless land phone services) Innovative products and services (Internet, broadband and cable services) Economic reforms have spurred the growth in the mergers and acquisitions industry of the telecommunications sector to a satisfactory level. Mergers and acquisitions in Telecom Sector can also have some negative effects, which includemonopolization of the telecommunication products and services, unemployment and others.However, the governments of various countries take appropriate steps to curb these problems. In countries like India, mergers and acquisitions have increased to a considerable level from themid 1990s. In the United States, the mergers and acquisitions in the telecommunications sector are going on in a full-fledged manner. The mergers and acquisitions in the telecommunications sector are governed or supervised by theregulatory authority of the telecommunication industry of a particular country, for instance theTelecom Regulatory Authority of India or TRAI. The regulatory authorities always keep a tab onthe telecommunications industry so that no monopoly is formed. telecommunication services providers have understood that in order to grow globally,strategic alliances and mergers and
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FOLLOWING ACQUISITIONS
ARE
THE THAT
IMPORTANT TOOK PLACE
MERGERS IN
AND THE
TELECOMMUNICATIONS SECTOR
The takeover of Mobilink Telecom by Broadcom. This can also be described as a suitableexample of product extension merger AT&T Inc. taking over BellSouth The acquisition of eScription Inc. by Nuance Communications Inc. The taking over of Hutchison Essar by the Vodafone Group. Now it has becomeVodafone Essar Limited China Communications Services Corporation Ltd. taking over China InternationalTelecommunication Construction Corporation The acquisition of Ameritech Corporation by SBC (Southwestern Bell Corporation)Communications The merger of GTE (General Telephone and Electronics) with Bell Atlantic The acquisition of US West by Qwest Communications The merger of MCI Communications Corporation with WorldCom
BENEFITS PROVIDED BY THE MERGERS AND ACQUISITIONS IN THETELECOMMUNICATIONS-SECTOR

Following are the benefits provided by the mergers and acquisitions in the telecommunicationsindustry: Building of infrastructure in a more convenient way Licensing options for mergers and acquisitions are often found to be easier Mergers and acquisitions offer extensive networking advantages Brand value Bigger client base Wide array of products and services
REASONS FOR THE GROWTH OF INDIAN TELECOMMUNICATION INDUSTRY

In recent times mergers and acquisitions in the Indian telecommunication industry have beendriven by a few important factors The inclusion of internet (including broadband) and cable services in the telecom sector. 37
www.final-yearproject.com | www.finalyearthesis.com New technologies like wireless fixed phone services. Deregulation in the telecom sector.
Rules
Related
To
Mergers
&
Acquisitions
In
The
Indian
Telecommunication Industry
Certain regulatory and statutory norms pertaining to mergers and acquisitions in the Indiantelecommunications 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 thatarea. Mergers and acquisitions should not lead to monopoly
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Major M&A deals in Indian telecom sector

Company/Service Name Orange, Mumbai Stake sold Buyer Seller Year Deal size (US$) 560 Mn Indicative Enterprise value (US$) 1.36 Bln Per sub value (US$)
41% 8.3% 5.1% 3.1% 100%
Hutch, India
Hutchison Group, Hong Kong Max India
Hutch Essar, India
Hutchison Group, Hong Kong Essar Group
Max Group, Delhi Kotak Mahindr a, India Hinduja
1998 2006 2006 2005 2000
NA NA NA 570
225 Mn
9 Bln
450 Mn
Hutch Essar
Max India & Usha Martin & Others
146 Mln
138 Mln
Command Cellular, Kolkata
Hutchison Indian Group,
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Idea Cellular Modi Telestra, Calcutta Bharti Bharti Airtel
48.14 % 100% 9.3% 10%
Aditya Group
Birla
Tata Group B.K.Modi and Telestra Warburg Pincus Bharti Group
2005 2000 NA 2005
NA NA
873 Mn 1.5 bln
2 Bln 160 Mln
400
Bharti Group, India Private Investors Vodaphone
NA
16 Bln
1000 1000
Aircel, Chennai Aircel, TN, Chennai and NE Spice, (Punjab and Bangalore) Reliance CDMA
79.24 % 74% 49% -
Sterling Group, Chennai Maxis, Malaysia Telekom Malaysia, Malaysia Qualcomm, San Diego, US Promoters
RPG Group Sterling Group NA
2003 2006 2006 2002 2005
210 Cr 750 Mn 1.07 Bln
496 -
178 Mn
363 Mln
Reliance Infocom m
1.15 Bln
10 Bln
BPL Mobile and BPL Cellular
NA
RISKS ASSOCIATED WITH MERGER

Here Is My Analysis Of The 10 Risks With Examples : 1. Regulation and Compliance : The regulatory authority in India has delayed the 3G auction and sets up new guidelines every now and then. It has also given 3G license for BSNL without giving it to other providers. Airtel and Vodafone which has launched iPhone 3G phone were left in the dark with 3G phones without any 3G service. 2. Entry Of 4-5 Players : Licenses were granted to 6 new players. Unitech, Sistema, etc.. Sitema has started its operations under the name of MTS by providing 1 million minutes free. New players and offers like these would 40
www.final-yearproject.com | www.finalyearthesis.com seriously dent the expansion plans of established players. All the players should think out of the box and come up with IDEAS. Next thing would be consolidation in the industry which is already happening in the telecom tower business. 3. Capital For Expansion : This is the biggest criteria for smaller players. While there are no smaller players, as the new players are backed up by some heavy-weights, expansion is still tough. This is where sharing infrastructure comes into picture. Indus Towers is one such example. BSNL has recently announced about leasing its towers. Initiatives like these will help both the older and newer players to penetrate into new markets. 4. Attracting & Managing Talent And Intellectual Capital : This is a tough one. With fierce competition comes the talent poaching. Companies should have some talent retention measures in place. Airtel has restructured its business into 9 verticals to retain talent. Not every company can do the same but, that is one option. 5. Management Of Strategic Partnerships : Providing free SMSs or call rates at 40 paise per minute are no longer the differentiators. It is the value Added services which matter. There were bunch of partnerships which happened in the last 2 months. AskLaila-Airtel partnership for local search, AmarChitraKatha Vodafone, IDEA and Bharat Matrimony have tied up for VAS. BSNL has recently tied up with Hungama portal for music and game downloads.Strategic partnerships like these should be nurtured and maintained. 6. Inappropriate Processes & Systems To Support Exponential Business Growth Experienced Over Past 4-5 Years : This is where investing in IT and the right tools is crucial. These are the operations that should be outsourcing so that the telecom companies can focus on their core areas. Indian telecom companies should outsource aggressively and focus on expanding their network and services. 7. Forecasting Returns From Technology & Infrastructure Investments 8. Privacy & Security Risks 9. Contain & Reduce Costs
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www.final-yearproject.com | www.finalyearthesis.com 10. Manage Consolidation And Mergers & Acquisition : This would tie back to point #2 of entry of new players and a possible consolidation in the telecom business and the tower business. Few of the risks given for India are different from global risks. For example, E&Y report has Losing ownership of the client as the number one risk. It does not feature as a risk for Indian telecom. Reason is India is still in the growth phase and losing a customer is not yet on the minds of the service providers.
CHAPTER 7
FINDINGS AND ANALYSIS
MERGER /ACQUISITION OF HUTCHISON ESSAR BY VODAFONE The acquisition of Hutchison Essar by Vodafone at an enterprise value of $19.3 billion which comes to around $794 per share was one of the biggest cross border deals in the booming Indian telecom market at that time. Vodafone won the 67% block on sale by Hutch-Essar leaving behind Reliance Communication and a
42
www.final-yearproject.com | www.finalyearthesis.com consortium led by Hindujas as well. It paid around 10.9 billion dollars for the acquisition. Profile of Co-parties Owners: Vodafone: 67% Essar: 33% Vodafone Profile: Vodafone Group plc is a global telecommunications company headquartered in Newbury, United Kingdom. It is the world's largest mobile telecommunications company measured by revenues and the world's second-largest measured by subscribers, with around 332 million proportionate subscribers as at 30 September 2010. It operates networks in over 30 countries and has partner networks in over 40 additional countries. It owns 45% of Verizon Wireless, the largest mobile telecommunications company in the United States measured by subscribers. Its primary listing is on the London Stock Exchange and it is a constituent of the FTSE 100 Index. It had a market capitalisation of approximately 92 billion as of November 2010, making it the third largest company on the London Stock Exchange. It has a secondary listing on NASDAQ. Essar Profile: The Essar Group is a multinational conglomerate corporation in the sectors of Steel, Energy, Power, Communications, Shipping Ports & Logistics as well as Construction headquartered at Mumbai, India. The Group's annual revenues were over USD 15 billion in financial year 2008-2009. Essar began as a construction company in 1969 and diversified into manufacturing, services and retail. Essar is managed by Shashi Ruia, Chairman Essar Group and Ravi Ruia, Vice Chairman Essar Group. Hutch Profile: Hutchison Whampoa Limited of Hong Kong is a Fortune 500 company and one of the largest companies listed on the Hong Kong Stock Exchange. HWL is an international corporation with a diverse array of holdings which includes the world's biggest port and telecommunication operations in 14 countries and run under the 3 brand. Its business also includes retail, property development and infrastructure. It belongs to the Cheung Kong Group 43
www.final-yearproject.com | www.finalyearthesis.com Vodafone-Essar: - Hutchison International, a non-resident seller and parent company based in Hong Kong sold its stake in the foreign investment company CGP Investments Holdings Ltd., registered in the Cayman Islands (which, in turn, held shares of Hutchison-Essar - Indian operating company, through another Mauritius entity) to Vodafone, a Dutch nonresident buyer. Vodafone Essar is owned by Vodafone 52%, Essar Group 33%, and other Indian nationals, 15%. On February 11, 2007, Vodafone agreed to acquire the controlling interest of 67% held by Li Ka Shing Holdings in Hutch-Essar for US$11.1 billion, pipping Reliance Communications, Hinduja Group, and Essar Group, which is the owner of the remaining 33%. The whole company was valued at USD 18.8 billion. The transaction closed on May 8, 2007. The total is Vodafone Essar subscription is 106,347,368 subscribers i.e., 23.94% of the total 444,295,711 subscribers. Individual Investors: Individual large stake holders Analjit Singh and Asim Ghosh sold their stakes to Vodafone in December 2009. Asim Ghosh, the former managing director of Vodafone Essar, had 4.68 per cent stake in the company held through investment firm AG Mercantile, and sold a part of it for about Rs 3.3 billion. Analjit Singh, who had a share of 7.58 per cent through three companies, sold a part of his stake for over Rs 5 billion. After the sale, the stakes held by Ghosh and Singh in Vodafone Essar will come down to 2.39 per cent and 3.87 per cent respectively. Vodafone Hutch Deal Time Line The time line for the Vodafone and Hutch deal is as follow: 2007/05/29 - Court sends notice to Vodafone and Hutch 2007/05/05 - Vodafone-Hutch deal gets Finance Minister's nod 2007/04/04 - Vodafone-Hutch deal: Decision likely at next FIPB meeting 2007/03/19 - FIPB to take up Vodafone proposal on Tuesday 2007/03/16 - Hutchison offers $415 m to Essar as `sign-on bonus' 2007/03/16 - Vodafone's Hutch deal in order: Kamal Nath 2007/03/15 - Essar, Vodafone reach agreement on jointly managing Hutch 2007/02/18 - What Vodafone will collect from the Hutch call 2007/02/15 - `Roses for Essar, telephony for masses' 2007/02/15 - Vodafone pledges $2-b investments 2007/02/12 - Hutch: Vodafone top bidder with $19-b offer 44
www.final-yearproject.com | www.finalyearthesis.com 2007/02/11 - Hindujas to partner Qatar Telecom, Altimo for Hutch 2007/02/10 - Hutch bidding goes to the wire 2007/01/11 - Vodafone offer in a few weeks 2007/01/09 - Vodafone starts due diligence of Hutch 2007/01/06 - Hutchison, Essar differ over right of refusal 2007/01/03 - Essar gets fund pledge worth $24 b for Hutch-Essar buy 2006/12/29 - Reliance Comm in race for Hutch-Essar 2006/12/23 - Vodafone joins race for Hutchison Essar stake 2006/12/21 - Vodafone may join race for Hutch Taxation Issue In Vodafone Hutch Deal: The Indian Revenue authorities issued show cause notice to Vodafone arguing that they had failed to discharge withholding tax obligation with respect to tax on gains made by Hutch on sale of shares to Vodafone. Vodafone filed a writ petition in the Mumbai High Court challenging the jurisdiction of the Revenue department. The revenue department issued show-cause to Vodafone asking for an explanation as to why Vodafone Essar (which was formerly Hutchison Essar) should not be treated as an agent (representative assessee) of Hutchison International and asked Vodafone Essar to pay $ 1.7 billion as capital gains tax. Indian Income Tax Department View: The whole controversy in the case of Vodafone is about the taxability of transfer of share capital of the Indian entity. Generally, the transfer of shares of a non-resident company to another non-resident is not subject to tax in India. But the revenue department is of the view that this transfer represents transfer of beneficial interest of the shares of the Indian company and, hence, it will be subject to tax. The revenue authorities are of the view that as the valuation for the transfer includes the valuation of the Indian entity also and as Vodafone has also approached the Foreign Investment Promotion Board (FIPB) for its approval for the deal, Vodafone has a business connection in India and, therefore, the transaction is subject to capital gains tax in India. Vodafone View: On the contrary, Vodafones argument is that there is no sale of shares of the Indian company and what it had acquired is a company incorporated in 45
www.final-yearproject.com | www.finalyearthesis.com Cayman Islands which, in turn, holds the Indian entity. Hence, the transaction is not subject to tax in India. Vodafone argued that the deal was not taxable in India as the funds were paid outside India for the purchase of shares in an offshore company that the tax liability should be borne by Hutch; that Vodafone was not liable to withhold tax as the withholding rule in India applied only to Indian residence that the recent amendment to the IT act of imposing a retrospective interest penalty for withholding lapses was unconstitutional. Now the taxmans argument was focused on proving that even though the VodafoneHutch deal was offshore, it was taxable as the underlying asset was in India and so it pointed out that the capital asset; that is the Hutch-Essar or now Vodafone-Essar joint venture is situated here and was central to the valuation of the offshore shares; that through the sale of offshore shares, Hutch had sold Vodafone valuable rights - in that the Indian asset including tag along rights, management rights and the right to do business in India and that the offshore transaction had resulted in Vodafone having operational control over that Indian asset. The Department also argued that the withholding tax liability always existed and the amendment was just a clarification. Key questions before the High Court: Whether the show cause notice issued by the Revenue authorities was without Jurisdiction as Vodafone could not be said to be liable under section 201 of the Income tax Act 1961 for not withholding tax? Whether the provisions relating withholding tax obligation under section 195 of the Acts have extra territorial application and a non resident without presence in India has an obligation to comply with it? Whether the transaction per se resulted in income chargeable to tax in India? Vodafones Petition and Arguments: Vodafones argument is that there is no sale of shares of the Indian company and what it had acquired is a company incorporated in Cayman Islands which in turn holds the Indian entity. Hence, the transaction is not subject to tax in India. 46
The Petitions And Arguments Of Vodafone Are As Under: It was not in default (under section 201) for not withholding tax as the law applied to situations where tax had been withheld and not deposited. Hence, to impose an obligation where no withholding had been made was unconstitutional. Giving a contextual interpretation, person liable to withhold tax could not include a non resident having no presence (in India), since such an interpretation would amount to treating unequals as equal by imposing onerous compliance obligations as applicable to residents or nonresidents having a presence in India. The transfer was with respect to ownership of shares in a foreign company and no capital asset in India. Further, change in controlling interest in Indian companies was only incidental to change in foreign shareholding. Vodafone also challenged the constitutional validity of retrospective amendments to sections 191 and 201 of the Act, motivated to impose an obligation on payer to withhold tax. The transfer of the shares of CGP which was a capital asset situated outside India could not result in any income chargeable to tax in India. A share in a company represents a bundle of rights and its transfer results in a transfer of all the underlying rights. However, what were transferred were only a share and not the individual rights. When there is no look-through provisions under the Income Tax Act, 1961 ("the Act"), such a provision cannot be read into the statute and the corporate veil cannot be lifted unless a tax fraud is perpetrated. The Supreme Court ("SC") in the case of Azadi Bachao Andolan (2003) 263 ITR 706 has held that there was no tax consequence in India when the shares of one of the intermediate holding company in Mauritius were transferred. Similarly, there should not be a tax consequence, even when an upstream holding company transfers its shares.
ANALYSIS
Analysis Of The Issue 47
www.final-yearproject.com | www.finalyearthesis.com HC ruling in Vodafone Case: The HC held that the series of transactions in question has a significant nexus' with India. Since the essence of it was change in controlling interest in HEL, it constituted a source of income in India. It held that the price paid by Vodafone factored in, as part of the consideration, diverse rights and entitlements being transferred as part of the composite transaction. Many of these entitlements were not relatable to the transfer of the CGP share. It held that intrinsic to the transaction were transfer of other rights and entitlements. Such rights and entitlements constitute capital assets' as per the provisions of the Act. The apportionment of consideration paid by Vodafone for a bundle of entitlements stated above lies within the jurisdiction of the Indian Revenue. The Indian Revenue Authorities sought to apportion income resulting to HTIL between what has accrued or arisen or what is deemed to have accrue or arise as a result of a nexus with India and that which lies outside. Subsequent to the HC ruling, the Revenue has raised a tax demand of Rs. 112,180 million on Vodafone for failure to withhold taxes. Meanwhile, the appeal filed by Vodafone before the Supreme Court was heard in November 2010. Analysis Of Decision This is a landmark ruling which throws light on principles of taxation of crossborder transfers. The High Court's observation on the principle of proportionality' that a portion of the income would be chargeable to tax is asignificant one. The Court has also observed that the other rights and entitlements, passed on as a part of the deal are separate assets and can be regarded as capital assets', within the meaning of the Act. These observations seem to indicate that transactions involving a simpler transfer of shares of a company outside India, which has companies in its fold in India, would not be chargeable to tax in India. However, if certain other rights and entitlements in India are transferred along with the transfer of shares, there would be an incidence of tax in India. This decision could certainly embolden the Revenue authorities to investigate offshore transactions, which have a connection with India or cases where limited interest exists in India and the demand raised by the Revenue authorities is a clear indication of things to come. 48
The Dutch government, on behalf of Vodafone, has approached the Indian government for settling a three-year-old dispute involving a tax claim of over Rs 11,000 crore. Netherlands has written to India asking it to consider an alternate dispute resolution that will run parallel to the ongoing court process through what is termed as a Mutual Agreement Procedure (MAP). India would examine the request and take a decision in accordance with the provisions of the India-Netherlands double tax avoidance agreement (DTAA). MAP is an alternate process of dispute resolution, and is an option available to a taxpayer in addition to and concurrent with the appellate process. However, under MAP, once the proceedings are initiated, it is possible to obtain a stay on the tax demand provided one gives a bank guarantee This opens up the possibility of a settlement on the lines of what Vodafone clinched in the UK earlier this year, when it agreed to pay 1.25 billion in taxes to settle a decade-long dispute dating back to 2000 regarding its Luxembourg subsidiary. Supreme Court Of India Decision The Supreme Court today ruled in favour of Vodafone in the $2 billion tax case saying capital gains tax is not applicable to the telecom major. The apex court also said the Rs 2,500 crore which Vodafone has already paid should be returned to Vodafone with interest. The decision will be a big boost for cross-border mergers and acquisitions here. The Income tax departments contention, if upheld, would have rendered standard transaction structures too risky forcing foreign companies to weigh potentially new litigation and insurance costs. Nearly five years after the Indian taxman issued the first notice to Vodafone international on September 2007 for failure to withhold tax on payments made to Hutchison Telecom, Chief Justice of India SH Kapadia and Justice KS Radhakrishnan pronounced their judgement. The SC has ruled that the transaction is not taxable in India, and it has made the following observations/ comments while pronouncing its ruling: Presently, there are no look-through provisions in the Indian domestic tax law to tax the transaction. 49
www.final-yearproject.com | www.finalyearthesis.com There is no extinguishment of property rights in India through the transfer of shares between two foreign entities of shares in another foreign entity. Similarly, provisions which treat a person as an agent/representative of a foreign entity for the purpose of levy and recovery of tax due from such a foreign entity is not applicable in the absence of a nexus. There is no conflict between the earlier decisions of the SC in Azadi Bachao Andolan, and Mc Dowell. The SC in the case of Azadi (263 ITR 706), had held that an act which is otherwise valid in law cannot be held as sham, merely on the basis of some underlying motive supposedly resulting in some tax advantage. The SC in the case of Mc Dowells (154 ITR 148), held that sanction cannot be accorded to a colourable device. The duration of the holding structure, timing of exit and continuity of business, are important factors while evaluating as to whether the transaction as a whole is a sham. Considering the factual matrix in the present scenario, the SC held that the transaction is not a sham. Withholding tax provisions in the Indian domestic tax law cannot apply to off shore transactions The Tax Authority has also been directed to refund the entire amount (US$ 0.5 billion) deposited by Vodafone as part payment towards the demand in early 2011 along with interest Tax policy certainty crucial for national economic interest.
The decision of the SC is expected to be a milestone development in the taxation of international transactions and on the judicial approach to tax avoidance. This case is, perhaps, the first in the world where the issue of taxation on indirect transfer of shares is being litigated before a countrys highest judicial forum. The principles emanating from this ruling could therefore, have ramifications beyond India. It could also be of relevance in shaping Indias tax policy on international taxation and tax avoidance in the future.
CHAPTER 8
CONCLUSIONS
M&As have become very popular over the years especially during the last two decades owing to rapid changes that have taken place in the business 50
www.final-yearproject.com | www.finalyearthesis.com environment. Business firms now have to face increased competition not only from firms within the country but also from international business giants thanks to globalization, liberalization, technological changes, etc. Generally the objective of M&As is wealth maximization of shareholders by seeking gains in terms of synergy, e c o n o m i e s o f s c a l e , b e t t e r f i n a n c i a l a n d m a r k e t i n g a d v a n t a g e s , d i v e r s i f i c a t i o n a n d r e d u c e d earnings volatility, improved inventory management, increase in domestic market share and also to capture fast growing international markets abroad. But astonishingly, though the number and value of M&As are growing rapidly, the results of the studies on the impact of mergers on the performance from the acquirers' shareholders perspective have been highly disappointing. In this paper an attempt has been made to draw the results of only some of the earlier studies while analyzing the causes of failure of majority of the mergers. Making the mergers work successfully i s n o t t h a t e a s y a s h e r e w e are not only just putting the two organizations together but also integrating people of two organizations with different cultures, attitudes and mind sets.Meticulous pre-merger planning including conducting proper due diligence, effective communication during the integration, committed and competent leadership, speed with which t h e i n t e g r a t i o n p l a n i s i n t e g r a t e d a l l t h i s p a v e f o r t h e s u c c e s s o f M & A s . W h i l e m a k i n g t h e merger deals, it is necessary not only to make analysis of the financial aspects of the acquiring firm but also the cultural and people issues of both the concerns for proper post-acquisition integration
BIBLOGRAPHY
BOOKS Chandra, Prasanna, Financial Management,(7e), Tata MC-Graw Hill. Pandey, I.M, Financial Management, 2006, Vikas Publication, New Delhi. 51
www.final-yearproject.com | www.finalyearthesis.com Bhalla, V. K., Financial Management & Policy, 1999, Anmol Publication, New Delhi. Kisore R.M, Advanced Financial Management, Taxmanns Publication.
WEBSITES
http://www.hindubusinessline.com http://www.economictimes.com http://www.sebi.gov.in www.wikipedia.com
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UNDER THE GUIDANCE MR. HITESH PANT

SUBMITTED BY JYOTSANA BHATT ROLL NO: 101636 ENROLLMENTNO:063634 9

DEPARTMENT OF MANAGEMENT STUDIES, BHIMTAL KUMAUN UNIVERSITY, NAINITAL 2012

SIGNATURE OF FACULTY GUIDE . MR. HITESH PANT

. JYOTSANA BHATT Roll no 101636 Enrollment no - 0636349

RISKS ASSOCIATED WITH MERGERS..39

CHAPTER 7 FINDINGS AND ANALYSIS. 41 CHAPTER CONCLUSIONS..4 9 BIBLIOGRAPHY 50

Reasons For The Growth Of Indian Telecommunication Industry

IMPORTANCE OF THE STUDY

Tse & Soufani (2001) Choi & Russell (2004)

Andre et al. (2004)

Abnormal Return TotalStock Return

4) Conceptual Vs. Empirical:

DATA COLLECTION AND ANALYSIS

DISTINCTION BETWEEN MERGERS AND ACQUISITIONS

Other Motives For Mergers

2. Acquiring New Technology

1.4 Procedure For Evaluating the decision or Merger & Acquisitions

3. Financial Evaluation: A merger is needed to determine the earnings and

3. MERGERS AND ACQUISITION IN INDIA

1.The Reliance BP deal

2.Essar Exits Vodafone

3.The Fortis Healthcare Merger

4.iGate Acquires Majority Stake In Patni Computers

5.GVK Power Acquires Hancock Coal

6.Essar Energys Stanlow Refinery Deal With Royal Dutch Shell

7.Aditya Birla Group To Acquire Columbian Chemicals

8.Mahindra & Mahindra Acquires Ssangyong

9.The Vedanta Cairn acquisition

10.Adani Enterprises Takes Over Abbot Point Coal

4.MERGERS IN INDIAN TELECOM SECTOR

IMPORTANT TOOK PLACE

BENEFITS PROVIDED BY THE MERGERS AND ACQUISITIONS IN THETELECOMMUNICATIONS-SECTOR

REASONS FOR THE GROWTH OF INDIAN TELECOMMUNICATION INDUSTRY

Major M&A deals in Indian telecom sector

41% 8.3% 5.1% 3.1% 100%

Hutchison Group, Hong Kong Max India

Hutch Essar, India

Hutchison Group, Hong Kong Essar Group

Max Group, Delhi Kotak Mahindr a, India Hinduja

1998 2006 2006 2005 2000

Max India & Usha Martin & Others

Command Cellular, Kolkata

Hutchison Indian Group,

48.14 % 100% 9.3% 10%

Tata Group B.K.Modi and Telestra Warburg Pincus Bharti Group

2005 2000 NA 2005

2 Bln 160 Mln

Bharti Group, India Private Investors Vodaphone

79.24 % 74% 49% -

RPG Group Sterling Group NA

2003 2006 2006 2002 2005

210 Cr 750 Mn 1.07 Bln

BPL Mobile and BPL Cellular

RISKS ASSOCIATED WITH MERGER

http://www.hindubusinessline.com http://www.economictimes.com http://www.sebi.gov.in www.wikipedia.com

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