Search the Internet          Tips  Sites: Finance, Investment

Wave of M&As seen in India's mobile phone industry

India's mobile phone industry is set to see another wave of mergers and acquisitions in the next few months as some large companies, which lost out in a just-concluded cellular licence auction snap up fringe players.

Industry officials said on Thursday at least two M&As were in the works, both involving firms based in south India.

"The market will see another round of consolidation in the coming months," Rajeev Chandrashekar, chairman of BPL Communications, a leading mobile phone company, told Reuters.

"You could see some announcements coming as early as in the next few weeks," a top industry source, who did not want to be identified said.

BPL on June 28 announced a merger with Birla-AT&T-Tata, a joint venture between US telecoms giant AT&T and two of India's biggest conglomerates, the Tata and Birla groups, to form the country's largest mobile company.

The deal, valued at $2 billion, was India's biggest ever merger.

The Birla-AT&T-Tata-BPL combine is now in talks with ModiCorp, which runs Spice Communications, a mobile network in the southern state of Karnataka.

Industry sources said they expected the combine would also strike a deal with RPG Cellular Services Ltd, which runs the mobile network in the southern city of Madras.

This follows its failure to win new mobile licences for these two zones in the recently concluded auction of licences for the slot of the fourth mobile operator to a bidding company belonging to Hong Kong's Hutchison Telecom.

India on July 31 completed the auction process for these licences, viewed by many as the last chance for private firms to enter the high-profile fast-growing mobile business.

MARRIAGE OF CONVENIENCE

For ModiCorp, which recently sold its operations in the eastern city of Calcutta, and RPG Cellular, there is little choice but to ally with this combine.

The reason -- increasing competition in the business will make survival difficult for small players which do not have the same access to capital as the larger groups nor cash of their own to grow their businesses.

Analysts said the Birla-AT&T-Tata-BPL combine was the only group interested in these two firms as the other two big mobile groups, Bharti Enterprises and Hutchison, do not need them.

Bharti already runs mobile networks in Madras and Karnataka, while Hutchison won the licences to be the fourth cellular operator in these two places.

Analysts said they expected the Birla-AT&T-Tata-BPL combine to acquire the two companies in a stock deal offering minority stakes to the shareholders of both companies whose value could be realised once the combine is listed later this year.

"A cash deal is unlikely as the combine does not have cash to throw around in acquisitions," said an industry official, who declined to be identified.

India's B K Modi business family and Hong Kong's Distacom own major stakes in Spice Communications while the Calcutta-based R P Goenka family and Vodafone are the major shareholders in RPG Cellular.

Tell us what you think of this report