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Telenor exit may portend trend

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8 years ago

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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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Video of Bill Gates enjoying Vada Pav with Sachin Tendulkar during Mumbai visit goes viral

Gates, currently touring India, has been making waves with high-profile engagements. Earlier this week, he touched down in New Delhi, where he held discussions with Prime Minister Narendra Modi and several Union ministers.

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2 days ago

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March 21, 2025

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Microsoft co-founder and philanthropist Bill Gates delighted his followers by posting an Instagram video featuring Indian cricket icon Sachin Tendulkar, with the playful caption, “A snack break before we get to work.” The brief clip captures the duo relishing Mumbai’s beloved street food, vada pav, whilst perched on a bench, ending with a teasing “Serving soon” message splashed across the screen.

Gates, currently touring India, has been making waves with high-profile engagements. Earlier this week, he touched down in New Delhi, where he held discussions with Prime Minister Narendra Modi and several Union ministers. His itinerary then brought him to Mumbai, where he met Maharashtra Chief Minister Devendra Fadnavis. The tech titan’s visit underscores his ongoing fascination with India’s innovative spirit, a theme he expanded upon in a recent blog post.

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Writing on his personal site, Gates reflected on the trip’s impact: “I came away with fresh perspectives because India is brimming with clever, driven individuals addressing some of the globe’s toughest challenges in ingenious ways.” His words echo sentiments he shared ahead of the visit, when he praised Odisha’s farmers for leveraging artificial intelligence to boost agricultural outcomes—a story that’s garnered attention for its blend of tradition and technology.

The vada pav moment with Tendulkar, a national treasure, adds a light-hearted touch to Gates’s packed schedule. It’s not just a snack break; it hints at a potential collaboration, though details remain under wraps. For Indian fans, seeing two legends—one from tech, the other from cricket—share a casual bite is a rare treat, blending global influence with local flavour.

As Gates continues his journey, his interactions spotlight India’s dual role as a hub of innovation and a cultural powerhouse. Whether it’s AI-driven farming or a street-side snack with a sporting hero, his visit is proving to be a feast of ideas—and vada pav.

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Manappuram Finance shares hit record high after Bain Capital announces $508 million stake deal

Shares of Manappuram Finance surged to an all-time high after Bain Capital announced plans to acquire an 18% stake in the gold loan provider.

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2 days ago

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March 21, 2025

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Manappuram Finance shares rise after Bain Capital deal

India’s gold loan provider Manappuram Finance saw its shares soar to an all-time high on Friday after Bain Capital revealed plans to invest $508 million for an 18% stake in the company. The move, analysts say, brings clarity to Manappuram’s management succession strategy and paves the way for stronger strategic control.

Bain Capital, a U.S.-based private equity firm, will subscribe to Manappuram’s shares and warrants at Rs 236 per share — a 9% premium over Thursday’s closing price of Rs 217.5. Following the transaction, Bain will jointly control the company along with other key stakeholders, referred to as ‘promoters’ under Indian regulations.

As of 12:05 p.m. IST on Friday, Manappuram’s shares surged by as much as 6.3% to Rs 231.08, marking their highest level on record.

Founder to step back as Bain gains influence

Founder and CEO V.P. Nandakumar, who has led the company for nearly four decades, will transition to the role of non-executive chairman once the investment is finalized. With Bain Capital now having rights to influence strategic decisions and appoint key roles including the CEO, analysts at Jefferies and CLSA have responded positively.

CLSA noted that the potential for re-rating of Manappuram’s stock is strong as new leadership takes over. Jefferies and CLSA have both raised their target prices by 14.6% and 20%, respectively, maintaining bullish ratings of “buy” and “outperform.”

Deal to boost gold loan business, offset microfinance losses

The deal is expected to close in the upcoming financial year and is likely to accelerate growth in the company’s gold loan segment, which currently contributes around 75% of its total revenue. With gold prices at historic highs, the demand for gold-backed loans remains robust.

Additionally, analysts expect part of the capital raised through the deal may be used to cushion the losses in Manappuram’s microfinance division. The company confirmed that Asirvad Micro Finance, its microfinance subsidiary, will withdraw its IPO draft filing amid changing market conditions and regulatory scrutiny.

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Alphabet’s $32 billion acquisition of Wiz marks biggest cybersecurity push

Alphabet has announced a $32 billion deal to acquire Wiz, reinforcing its cloud security offerings as it competes with AWS and Microsoft Azure.

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4 days ago

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March 19, 2025

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Alphabet to acquire Wiz for $32 billion to boost cloud security

Alphabet, the parent company of Google, has announced its largest acquisition to date with a $32 billion deal to buy cybersecurity startup Wiz. The move signals Alphabet’s aggressive expansion in cloud security as it competes with Amazon Web Services and Microsoft Azure in the cloud computing market.

A strategic investment in cybersecurity

The acquisition will integrate Wiz into Google Cloud, reinforcing its security capabilities to help businesses mitigate cyber risks. The deal, which follows Alphabet’s previously unsuccessful $23 billion bid, underscores the company’s commitment to securing a stronger foothold in the cloud security space.

Wiz, an Israel-based firm, provides security solutions that work across major cloud providers, including Amazon Web Services, Microsoft Azure, and Google Cloud. The company has gained significant traction, boasting clients such as Morgan Stanley, BMW, and LVMH.

Regulatory scrutiny and financial impact

Despite the high price tag, Alphabet appears confident in securing regulatory approval under the new U.S. administration, which has maintained a watchful eye on major tech mergers. Notably, the termination fee—over $3.2 billion—stands among the highest in M&A history, signaling both parties’ commitment to closing the deal.

Alphabet’s stock dipped nearly 3% following the announcement, reflecting investor concerns over its heavy spending, particularly in AI and cloud computing. The company may need external financing, given its cash reserves of approximately $23.47 billion as of December 31, 2024.

Growing importance of cybersecurity

The acquisition highlights the increasing demand for cybersecurity solutions, especially in light of last year’s global CrowdStrike outage that disrupted businesses worldwide. Analysts suggest that for Google Cloud to compete effectively with Microsoft Azure, it must offer a more comprehensive suite of security services.

Alphabet expects the deal to be finalized in 2026, pending regulatory approvals. Meanwhile, Wiz will continue providing its services across multiple cloud platforms, potentially alleviating antitrust concerns.

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