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Telenor exit may portend trend

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Telenor exit may portend trend

[vc_row][vc_column][vc_column_text]No longer wise to wait for valuations to rise before selling out; market reset likely to yield three main players

By Sindhu Bhattacharya

The valuation at which Norwegian telecom operator Telenor agreed to sell off its Indian operations to Bharti Airtel last week reveals a lot more besides just the seller’s desperation to cut losses and run. It shows why all other small telecom operators still braving it out in the world’s second largest telecom market may need to also hasten their exits.

This is no longer a game for the weak hearted, and as the Telenor deal shows, it is also no longer wise to wait for valuations to rise before the small guys start thinking of selling out. Yes, the changed telecom market reality has partly been engineered by the arrival of Reliance Jio Infocomm last September in an already crowded market. Another reason could also be the abundant spectrum availability for major telcos after the last round of auctions which has cooled the appetite of big operators to pay any premium to acquire the smaller rivals. Telenor did well to absorb its losses and exit while there was still a taker. And Bharti has gained not just in money terms but also by stocking up on spectrum for future wars with RJio on the data front.

According to analysts, the Bharti-Telenor deal was concluded at just about Rs 2,000 crore when they were expecting the deal size to be up to four times more for Bharti to acquire Telenor’s spectrum, customers and employees. Telenor had said while announcing the deal that Bharti would only acquire outstanding spectrum payments and other operational contracts including tower lease, which led analysts to conclude that Bharti will invest just Rs 2,000 crore in the deal.

Analysts from brokerage Motilal Oswal said in a note to clients this morning that after the recently-concluded auction, there were limited takers for incremental spectrum in the market. This made it difficult for Telenor to get any premium whatsoever for its significant spectrum holding in some of India’s most populous telecom circles.  Given the impending merger of number two and three telecom operators, Vodafone and Idea Cellular; the already inked RJio-RCom spectrum sharing terms; and the fact that no sizeable operator was willing to take its spectrum, Telenor was anyway left with limited options. This may have led to the low valuation in its deal with Bharti. The bottomline is that the deal worked in Bharti’s favour because it came so cheap.

These analysts further said that at a potential investment of about Rs 2,000 crore for Bharti, generating operating cash flow of Rs 32,000 crore and net debt of Rs 102,000 crore, “the investment would add hardly 2% to net debt, which would be offset by the EBITDA contribution from the merger.”

Also read: Telenor’s painful exit and the writing on the wall

This piece points out that as consolidation has picked up pace in India’s telecom market, sellers are settling for lower and lower valuations. “Telenor even settled for nothing, despite having 44 million customers and nearly Rs 5,000 crore in annual revenues; leave alone the value of its spectrum.”

The Motilal analysts quoted earlier said the Bharti-Telenor deal bolsters Bharti’s defence against RJio. While the incremental spectrum Bharti gets as part of this deal may not be presently required, given the large-scale data traffic on RJio’s network, holding high quantum of spectrum would allow Bharti to compete with RJio in a fixed-cost-driven market. “We believe Bharti’s strategy to remain ahead of the curve in data-rich spectrum investments should hold it in good stead”.

Not just the Bharti-Telenor deal, smaller telcos need to also take a lesson from other M&As being lined up. Already, the number two and three telecom operators in India. Vodafone and Idea Cellular, are in merger talks. If this merger happens, then the merged entity and Bharti will together control over 70% of India’s telecom market share by revenue. This obviously spells doom for remaining small players. Industry estimates peg post-merger market share for Tata Teleservices at 6.5%, BSNL and MTNL combine at 5%, Aircel at 5.7% and Sistema at 4%. Reliance Communications (RComm) is estimated to be close to Sistema’s share at 4.2%.

Also read: Vodafone, Idea merger plans leave Tata Tele in a fix

The market has space for four or at best five strong operators to play. Any more and it will become a very uneven playing field. Already, RJio’s freebies have spurred others to enter a bruising price war. As RJio’s commercial launch nears its April one deadline, competitors like Bharti and Vodafone will start offering competing plans – RJIo has promised voice calls for free and no charges for national roaming and there are already indications that at least Bharti will match these offers.

Also read: Tata in early talks to join RCom-Aircel-MTS combine to take on Jio

This piece speaks of a possible merger of Tata Teleservices with the RComm, Aircel, MTS combine and goes on to say that such a move could create a strong number three telco behind the proposed Vodafone-Idea combine and Bharti Airtel.[/vc_column_text][/vc_column][/vc_row]

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Adani, Torrent compete to purchase Gujarat Titans from CVC Capital

The probable sale of the Gujarat Titans, with the lock-in period coming to a close, will therefore be a defining moment in the changing face of IPL investments.

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The Adani Group and Torrent Group are currently negotiating a deal with private equity firm CVC Capital Partners to offload a controlling stake in the Indian Premier League franchise Gujarat Titans. According to sources, close to the development, reports say CVC Capital Partners will be looking to sell a majority interest while retaining a minority share in the franchise.

This becomes important because it is aligned with the end of the lock-in period by the Board of Control for Cricket in India (BCCI), which restricts any new teams from selling stakes until February 2025. The three-year-old franchise Gujarat Titans is reportedly worth $1 billion to $1.5 billion. CVC Capital Partners had paid ₹5,625 crore for the franchise in 2021.

A source close to the development pointed out that IPL franchises have attracted many investors’ interest since the league has proved an asset with a good reputation for money-making capabilities and cash flows. This growing interest of investors embodies the financial value and stability that come with the IPL franchises.

Gautam Adani, who owns teams in the Women’s Premier League and UAE-based International League T20, is understood to be one of the serious buyers. In 2023, Adani’s group won the Ahmedabad franchise in the WPL with a bid of Rs1,289 crore, the highest offer. His interests in this potential deal signal his commitment to expanding his footprint in the cricketing world.

Arvinder Singh, COO of Gujarat Titans, exuded confidence in the financial future of the franchise. He said the team was confident of turning profitable in the next media rights cycle, referring to even the original ten IPL franchises that took four to five years to turn profitable. He added confidently that the Gujarat Titans would not only turn profitable but significantly enhance in brand value.
 
This surging interest of investors in it is evidence of the growing financial attractiveness of IPL franchises, driven by healthy revenue streams and an increasing global footprint. The probable sale of the Gujarat Titans, with the lock-in period coming to a close, will therefore be a defining moment in the changing face of IPL investments.

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PayTm share price slips 2 per cent over SEBI warning

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Paytm

The share price of PayTm fell by nearly 2 per cent on Tuesday following a warning from the the Securities and Exchange Board of India (SEBI).

PayTm’s parent One 97 Communication had got SEBI’s administrative warning letter on some transactions involving the PayTm Payments Bank during fiscal year 2021-2022. The bourses reacted strongly leading to PayTm shares falling by 1.88% to Rs 460.80 per share on the Bombay Stock Exchange.

SEBI said it had noted the violation with concern and said these matters are being viewed very seriously. The regulator warned the company to exercise caution going forward and improve compliance to rules to prevent similar incidents in the future.

The markets regulator added that failure to comply with rules may force it to invoke enforcement actions as per the law.

In its response to SEBI, PayTm said in a media release that it has always followed listing regulations, as well as any change to these rules over time. The company said it would keep up its commitment to maintain and follow high standards of compliance. Paytm said it intends to provide an adequate response to SEBI on this matter.

PayTm said it has always followed Regulation 23 along with Regulation 4(1)(h) of the SEBI Listing Regulations, without including any change made to these rules over time. Paytm added that the letter from  SEBI has no influence on its finances, operations or other activities in any way.

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Zomato, Swiggy hike platform fee by 6% 

After the hike, the platform fee would be Rs 6 per order from an earlier Rs 5 per order.

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The food delivery majors, Zomato and Swiggy, have recently increased their platform fee by 6 per cent for food orders initially in Delhi and Bengaluru.

The food giant is currently charging in the national capital and IT hub, Bengaluru, the platform fee is distinct from delivery fee, goods and services GST, handling charge and restaurant charges.

After the hike, the platform fee would be Rs 6 per order from an earlier Rs 5 per order. Gradually, the higher platform fee is expected to roll out to other cities as well.

Notably, this fee is applicable universally to all food orders, irrespective of customer enrollment in loyalty programmes offered by both food giants. The charges directly contribute to the companies’ revenue streams and cost management efforts. The platform fee goes to the food aggregators to apparently control costs and increase revenues.

In April, they charged Rs 5 per order, but now it’s been increased by Rs 6 per order. That’s a 20% increase in fees for food delivery. This change in their strategy to adjust the price in a market as they expand their services.

Increase in platform fees, impacting how much customers pay for their food deliveries across the board. When customers order food using the app, they will notice different charges, besides the platform fees. These include delivery fees, handling fees, GST (Goods and Services Tax), and charges from the restaurant.

The charges earned by the platform, directly go to the food delivery app, helping to manage all expenses and boost their wages. The food delivery platform aimed to make between Rs 1.25 to Rs 1.5 crore per day through the fee, the app charges.

In August last year, Zomato introduced platform fees of Rs 2 per order for the first time. In October, they raised their platform fees from Rs 2 to Rs 3 in most and in major cities. Additionally,  Zomato is a quick commerce platform.

According to reports, Zomato stock reached its highest price of Rs 232 on the Bombay Stock Exchange. This achievement has made Zomato founder and CEO, Deepinder Goyal, a billionaire. The company has experienced a strong upward trend over the past years, driven largely by the expansion and success of its quick commerce subsidiary in Blinkit.

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