MTN to takeover Reliance Communications in Entirety ?
The second generation of Ambani is quite different from the first. Dhirubhai always wanted to Build world class industries, however, Anil Ambani is always tilted towards a BUY instead of BUILD. [Recall Ambani's unsuccessful bid for Hutchison Essar]
If reports from the WSJ are to be believed [I can't believe it], Reliance will takeover MTN and the latter may gain control of Reliance.
MTN acquiring India’s second-largest mobile-phone operator to create a top-10 player in the industry world-wide, people familiar with the situation said. At this point, the talks are on a reverse takeover, one said. But there’s no certainty this is going to be the final structure.
A deal this time “has better prospects than the talks with Bharti, which didn’t want to lose its Indian identity in the merged entity,” the second person said. “Ambani doesn’t seem to have this kind of concern.”
Its not just Reliance GSM but Reliance GSM + CDMA will be in the MTN-Reliance entity, if WSJ is to be believed.
Is MTN looking to Acquire than be Acquired ?
From the recent outcome of Bharti Airtel negotiations, it appears that MTN Group is looking to acquire than be acquired by a foreign Telco. Regulatory issues and the need to know local operating conditions in 21 countries mean any acquirer must be prepared to ensure continuity of management. This, together with minority shareholders after a premium valuation, means any acquisition is going to be expensive for the acquirer.
On page 21 of the 2007 annual report, MTN’s stated goal in 2008 is,
actively seek value-adding expansion opportunities in emerging markets with a view to diversifying earnings beyond the concentration in South Africa and Nigeria.
If MTN was up for grabs, then a Gulf or European Telco would be an appropriate company to gobble it rather than an Indian. As posted yesterday, we think that MTN will BUY into Reliance GSM story and may also consider in parts – Reliance Globalcom and Reliance Infratel 
This is assuming RCom will be a holding company and Anil Ambani is unlikely to give up more than 50% in RCom. [Following Dhirubhai's footsteps]
Is Anil Ambani selling Reliance GSM story to MTN ?
After Sunil Mittal of Bharti Airtel hung up on MTN group, Anil Ambani of RCom is now in the fray to snap up or merge or [????] MTN into itself. However, Ambani has a tough task on hand – Roll out Reliance GSM services in India and also prepare for the 3G auction.
MTN offers good opportunity due to its exposure to strong growth across the African continent. However, a potential deal with MTN likely poses greater risks for Reliance Communication than it could have for Bharti Airtel. RCom’s net debt has been rising since the end of FY2008 and is almost thrice than Bharti Airtel. Adding to RCom’s woos is RCom’s comfort over working in a partnership (with MTN) seems debatable as RCom has hitherto preferred singular control or 100% ownership across its businesses.
Since RCom is an integrated telco, we doubt if Ambani would agree for a merger of MTN-RCom. However, since MTN Group is also looking to BUY more growth, Ambani may sell the Reliance GSM saga in India to MTN. Hopefully, both the companies will connect soon
Google embracing Third Party Ad Networks
Google in a communication has said that it is accepting display ads from Third party vendors. This means like qualified and ethical vendors such as Komli have good chance to grow with Google. However, these vendors must adhere to Google’s policy – No Po*n and Don’t be Evil [We first discovered that Yahoo! India's partner Tyroo was monetizing Torrentz website, which will fall under the shady category under Google's Terms] The Google e-mail said,
By accepting third-party ads, we can attract a greater variety ofadvertising on the Google content network, which we believe will result over time in increased revenue for publishers and more relevant advertising for end users.
In a separate development today, Larry Page, said,
Now, if you put 90 percent of the communications all in one company … that’s really a big risk, especially one (Microsoft) that has a history of doing bad stuff.
Google driven by Eric is confident of sailing through the gates of anti-trust if the Yahoo-Google Advertisement deal were to materialize. However, we think that Yahoo! will accept couple of Billion Dollars in premium and spin off its Search and Digital Advertisement into a separate company. Yahoo! and Microsoft will then rely on this entity for Search and Advertising needs, a win-win situation for both as Yahoo! will focus more on its remaining business and Microsoft getting the desperately needed online presence.
Bharti Airtel’s Terabit OFC Network to connect Europe and India
Bharti Airtel’s CEO, Mr. Mittal is in London seeking finance for MTN Wireless bid. However, his Enterprise Services, President – David is busy connecting India to Europe. David announced the building of 15,000 km 3.84 Terrabit OFC sub-marince cable system connecting Europe [London] to India via the Middle East. The project is known as Europe India gateway [EIG] and is expected to cost $700 million, which is to be completed by Q2-2010. Alcatel Lucent and Tyco are the telecom vendors for the project.
Memebers in the EIG consortium include – AT&T, BT, C&W, Djibouti Telecom, Du, Gibtelecom, IAM, Libyan Telecom, MTN Group Ltd., Omantel, PT Comunicacoes-S.A, Saudi Telecom Company, Telecom Egypt, Telkom SA Ltd, and Verizon Business
Mr. David of Bharti Airtel said,
There is a tremendous rise in use of data and broadband applications among enterprises and consumers globally, and India is no exception. Whether it is large enterprises leveraging communications technologies to compete in a truly global environment or consumers seeking real-time entertainment over the internet, international connectivity has become a vital part of our lives.
Its a fantastic move by Bharti Airtel as India will require this connectivity with increasing broadband subscribers. This will also help Enterprise customers who are planning on complex Remote Infrastructure Management outsourcing and Internet companies who are planning to go local or move part of their datacenters to India.
Reliance Globalcomm [erstwhile Flag Telecom] is already operational on a similar route. Bharti Airtel currently has two submarine cable systems – i2i to Singapore and SEA-ME-WE-4 to Europe, and is building an additional cable landing station in Mumbai to land the SEA-ME-WE-4 cable.
Bharti Airtel Vs MTN Group
Though Bharti Airtel declined that it was in talks with MTN Group, the latter in a filing with a stock exchange has confirmed its exploratory talks with Indian telco. As I said earlier, it will be difficult for Bharti Airtel to go solo in its bid for MTN and may seek the backing of cash rich investors like SingTel or Govt of Singapore etc in a joint bid.
Here is a comparison between Bharti Airtel and MTN Group. All figures in Million. For MTN [Dec ending FY07] and for Bharti Airtel [Mar ending FY08]
- Wireless Subscribers base for MTN – 68 mn Vs Bharti Airtel 62 mn
- Revenues – MTN $9,624 Vs Bharti Airtel $6,658
- Net Profit – MTN $1,396 Vs Bharti Airtel $1,669
- MTN operates across several different countries in Africa, while Bharti Airtel has presence in Channel Island, Guernsey apart from India.
Lets see if Bharti Airtel will be able to takeover MTN or will SingTel press Bharti for a merger with MTN [less likely].
Feed
