M&A deals in telecom sector in FY'08

M&A deals in the telecom sector in FY'08 were worth more than $9.15b ($8.065b by foreign players), according to Assocham[1].

Consolidation in the telecom sector accounted for more than one-third of total M&A deals in India in FY'08.

Global merger volume declined to a third in FY'08, primarily due to the lack of credit.

A few of the notable deals in the telecom sector are as follows:

1. Japanese major NTT DoCoMo - 26% stake - Tata Teleservices - $2.7b - largest of around 20 deals this year - Pan India GSM and CDMA license

2. Turkcell, leading Turkish telecom company and Europe’s third-largest operator by subscribers - 51% stake - Datacom Solutions - $2.2b (expected) - currently in process

3. Italian multinational, Telecom Italia - 49% stake - Unitech Telecom - $2 billion
{revised to Telenor - 67.25% - Unitech Wireless - $1.36b [3]} - Pan India GSM License

4. Dubai-based Emirates Telecommunications Corp (Etisalat) - 45% stake - Swan Telecom - $900 million (all cash) - Swan Telecom had spectrum in 10 out of 22 circles - GSM License in 13 circles

5. Idea Cellular - 40.8% stake - Spice Communications - $679 million - among the major domestic deals

6. Reliance Globalcom Limited, subsidiary of India's largest integrated telecom Service provider Reliance Communications - Vanco Group, London based global managed network services provider - $365 million - largest offshore deal

7. Bahrain Telecom (Batelco) - 49% stake - S Tel (Chennai-based) - $225 million - GSM license in 6 C circles

A few more deals are as follows:

1. TMI - Idea Cellular - 14.99% stake in Idea by swapping its 39.2% in Spice - $1.7 billion - Pan India GSM license

2. Sistema - Shyam - Acquired 51% stake initially. Has raised its stake since then to 73.1% - $58.1 milion for 51% stake - At time of acquisition, had license in Rajasthan only. Later was awarded license for pan India (CDMA)

Sources:
[1] http://www.assocham.org/arb/aep/AEP_telecom-article_Dec2008.pdf
[2] http://economictimes.indiatimes.com/News/News_By_Industry/Telecom/Middle_East_telcos_dial_India_for_share_of_3G_pie/articleshow/4044511.cms
[3] http://www.reuters.com/article/rbssTechMediaTelecomNews/idUSLH25073620090317
[4] Anchor Report: Telecoms India: Nomura Singapore Ltd: 15 April 2009

Frequencies of operation

The following are the frequencies of operation for the following technologies:

(i) 2G GSM: 5 MHz blocks in 900 MHz and 1.8 GHz bands
(ii) 3G: 5 MHz blocks in 2.1 GHz band
(iii) BWA (WiMax): 20 MHz blocks in 2.3 and 2.5 GHz bands

Expenses in the telecommunications industry

Expenses in the telecommunications industry can be classified under three headings:

Operating expenses:
Operations (generator-running expenses) and maintenance of the tower
Mobile termination charges of Re 0.13 - Re 0.30 per minute for connecting to some other wireless service provider's network
Fixed termination charges of Re 0.19 - Re. 0.28 per minute for connecting to some other wireline service provider's network
Average carrier charges of Re 0.16 - Re 0.72 per minute for carrying a call on some other service provider's optical fibre

Investing expenses:
Setting up towers: Around Rs. 1 lac for a roof-based tower and around Rs. 3 lacs for a ground-based tower
Spectrum purchasing fixed cost (License fee)
Access charges

Financing expenses:
License fee : 6-10% of aggregate revenues
Spectrum charges : 2-6% of revenues
Contribution towards Universal Service Obligation Fund (USOF) : 5% of revenues

MTNL commences 3G in Delhi

After 13 years of 2G, 3G is finally here in India.

MTNL launched its 3G services in Delhi on 11th December'08. It has chosen to name these services as "JAADU". BSNL and MTNL have already been allocated broadband and wireless access spectrum to facilitate early rollout of 3G and WiMax services. The bidding for the rest of the telecom operators is scheduled for January 2009.

MTNL's 3G network is based on UMTS (Universal Mobile Telecommunications Systems) technology. The equipments for establishing infrastructure have been purchased from Motorola. Initially, the 3G coverage in Delhi would be limited to Connaught Place, Sanchar Bhavan, Rajaji Marg, India Gate, Pragati Maidan, Delhi Gate and Minto Road. However, the commercial launch will take place early next year. MTNL is also expected to start its 3G services in Mumbai by end of January. BSNL is expected to start its launching of 3G services with Chennai sometime in the next year.

There are talks that 3G services by MTNL will also be used for mobilee video surveillance in which video cameras would be connected by WiFi wireless links or landline which would be connected to mobile devices by 3G. This would be possible due to the high speed of upto 2 Mbps, whereas the highest speeds in GSM and CDMA are 50 and 144 kbps respectively. Video streaming requires speeds of around 380 kbps.

Subscribers data for Oct'08 by TRAI

According to the press release by TRAI, the following are the updated figures (as of 31-Oct-2008) regarding the mobile subscribers:

• 10.29 million telephone connections (10.42 wireless subscribers less 0.13 wireline subscribers) added in Oct' 08
• Teledensity reaches 31.50% mark
• Total number of telephone connections reaches 363.95 million (325.73 million wireless and 38.22 million wireline)
  
• The service provider-wise wireless subscriber details are as follows:
• Airtel: 80.2 million subscribers (increased by 2.7 million)
• Reliance: 57.8 million subscribers (increased by 1.8 million)
  
• Vodafone Essar: 56.7 million subscribers (increased by 2.1 million)
• BSNL: 44.6 million subscribers (increased by 0.7 million)
  
• Idea: 31.6 million subscribers (increased by 1.2 million)
• Tata Teleservices: 30.2 million subscribers (increased by 0.9 million)

Source: http://www.trai.gov.in/presspre.asp?id=611