With the economy in India struggling, an uncertain policy scenario leading up to the next elections, and a mergers and acquisitions (M&A) policy for telecom in India in the works, there’s a report of a complicated three-way merger between Tata Teleservices, Aircel and Sistema, according to the Economic Times. Docomo currently holds 26% stake in Tata Docomo, while Maxis has been looking to sell its Aircel stake. Sindya Securities and Investments Pvt Ltd, promoted by Suneeta Reddy and P. Dwarakanath Reddy, of the Chennai based Apollo Group hold 26% in Aircel. Russian conglomerate Sistema holds a 73.71% stake in Shyam Sistema in partnership with Shyam Telelink.
Apart from the fact that the only fun name for this combination would be AirSisTa (which is not half as funny as Batata, which the Birla-TATA- AT&T combination that became Idea Cellular was called), purely out of academic interest, let’s take a look at how this rumored and unlikely three-way merger might impact the telecom map of India:
1. Mobile subscriber base
Tata Tele, Aircel and Sistema (MTS) are at numbers 6, 7 and 9 in the telecom operator league table, based on the number of active connections (total connection base is immaterial). Post acquisition, AirSisTa would have an active connection base of 88.34 million, and an active-connection market share of 12.08%, behind RCOM, which has 14.93%. India’s top four telcos have over 100 million active connections, and the next largest is BSNL, with 55 million. The AirSisTa combination would essentially displace BSNL, but still be quite some distance away from RCOM. Airtel leads, with an active-connection market share of 24.76%, followed by Vodafone with 20.23% and Idea with 16.73%.
Only 65.26% of AirSisTa’s total connection base of 135.36 million would be active. On a side note, only 55% of Sistema’s connection base is active? That’s terrible.
2. Roaming: Aircel has a 2G intra-circle roaming arrangement with Reliance Communications. This would be affected because AirSisTa would have pan India 2G spectrum
3. 3G: The AirSisTa combination would have 3G spectrum almost across India, except for the two key circles of Delhi and Mumbai, and the low density and hence low priority circle of Himachal Pradesh. The additional issue that they would face, is that they would have 3G spectrum from both Aircel and Tata for Karnataka, Kerala and Punjab. It’s unlikely that the government would allow them to keep two slots of spectrum in these circles, even though the 5MHz that the government auctioned is rather low.
MTS has CDMA spectrum in India in 8 circles, and appears to be the only telecom operator in India that actually wants CDMA spectrum – it was the only participant in the recent CDMA auctions, and it is the smallest of these players. Tata Teleservices has CDMA spectrum across India.
The ET story posits that Sistema is cash rich is likely to be the dominant player: among the three, it lost the most when India’s Supreme Court canceled 122 licenses allocated by A. Raja, and with Maxis looking to exit, and Sistema looking to expand, it is a likely partnership. From a Tata Tele perspective – does Docomo want out?
Update: fixed a typo