Despite the Massive $20 Bn Dollar Corruption Scam in the Ministry of Communication and the Department of Telecom, things haven’t changed much as the same old dirty law makers and bureaucrats occupy the seats of power. This time around they are framing the rules for Mergers & Acquisitions in the Telecom Space which are likely to be influenced by India’s Richest Billionaire and Insider Trader, Mukesh Ambani.
Insiders from the DoT has sent feelers that the M&A Policies will be scripted to favor the smooth amalgamation of Reliance Jio Infocomm and Reliance Communications. We expect Reliance Jio to use the spectrum sharing rules to borrow spectrum from RCOM at favourable economics to provide voice services. We expect the spectrum sharing rules to include clarity on MNO/MVNO relationships which may allow Jio to piggy back on RCOM’s spectrum without the need to acquire a similar band in the upcoming auctions. If the spectrum sharing rules do not touch upon the MVNO rules, Jio may face problems under the new Unified License Rules.
However, in the longer run, a merger between the two entities may present the best opportunity for both the companies to maximise economics. Hence, the spectrum sharing rules which are likely to be announced along with the M&A policy may prove to be important for the near-term competitive dynamics in the industry.
Who will Acquire Aircel ?
The Maxis-backed operator has been under financial duress owing to Maxis’ inability to invest further1. Given its pan-India footprint, financial distress and relatively new network infrastructure, Aircel may be an attractive proposition for a merger with one of the newer operators – Tata and Sistema are potential suitors.