Shri Dharmasthala Manjunatheshwara Institute for Management Development, Mysore

Course

Strategic Management
Strategic Study

On

Bharathi Airtel Acquiring Tata Tele Services

Date of Submission

24st August 2019

Submitted to:

Lt Col Dr. Prasad SN

(Professor – Strategy & HRM)

Submitted by:

Group No. B8

Batch 2018-20

Name PGDM No.

Veena Shravani 18113
Nisarga Ganesh 18116
Shashank MB 18119
Shruthi 18122
Vikas J 18126

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Introduction .........................................................................................3
Merges and Acquisition ...................................................................3
Types of Merges and Acquisition ....................................................3
Reasons for Merges and Acquisition ..............................................4
Important consideration should be taken in account ...................5
Stages Involved in Merges and Acquisition ...................................5
Reasons for failure for Merges and Acquisition............................5
About Bharati Airtel ...........................................................................6
About Tata Teleservice .......................................................................7
About the Industry ..............................................................................8
India Telecommunication Market .....................................................8
Frameworks .........................................................................................9
SWOT ................................................................................................9
Porter’s 5 Force Model ..................................................................10
PESTEL ...........................................................................................11
Competitor Analysis ..........................................................................15
Principal strategic aspects Unique to the organisation/situation. 17
Individual Analysis ............................................................................18
Veena Shravani-18113....................................................................18
Nisarga Ganesh-18116....................................................................19
Shashank-18119 ..............................................................................19
Shruthi-18122 ..................................................................................20
Vikas-18126 .....................................................................................20
Recommendation and Conclusion ...................................................22

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Introduction
Merges and Acquisition
Mergers and acquisitions (M&A) are defined as consolidation of companies. Differentiating
the two terms, Mergers is the combination of two companies to form one,
while Acquisitions is one company taken over by the other. M&A is one of the major aspects
of corporate finance world. The reasoning behind M&A generally given is that two separate
companies together create more value compared to being on an individual stand.

The difference between mergers and acquisitions is that mergers is combination of two
companies and forming one whereas acquisitions is one company taking over another. M&A
is done with an objective of wealth maximization and two companies together will create more
value compared to an individual company. The Indian M&A landscape has witnessed several
big-ticket deals in the past few years. At a time when Indian business houses are constantly
looking at inorganic growth through acquisitions of other businesses, the M&A arena appears
stronger than ever before now. Examples of recent M&A are Sun Pharma and Ranbaxy,
Walmart and Flipkart. The M&A deal tally of Corporate India for the first quarter of 2018 was
worth USD 18.53 billion

Merges and Acquisition can take place

• By purchasing asset
• By purchasing common shares
• By exchanging share for shares
• By exchanging shares for assets

Types of Merges and Acquisition

Companies merge and acquire each other for many different reasons, there are basically four
main types of merger and acquisition which the companies join forces

1. Horizontal Merge/Acquisition: Two companies come together with similar products /

services. By merging they are expanding their range but are not essentially doing
anything new
2. Vertical Merger/Acquisition: Two companies join forces in the same industry, but they
are at different points on the supply chain. They become vertically integrated by

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 improving logistics, consolidating staffs and perhaps reducing time to market
productions
3. Conglomerate Merge / Acquisition: Two companies in different industries join forces
or one takes over the other in order to broaden their range of services and products. This
approach can help reduce the cost by combining back office activities as well as reduce
by operating in a range of industries
4. Concentric Merger / Acquisition: In some cases, two companies will share customer
but provide different services

Reasons for Merges and Acquisition

• The idea that combining businesses will lead to increase in the performance and
decrease the cost
• In order to penetrate in the market and diversify many companies go for M&A as this
will not have a great impact on the individual companies’ profitability
• Mergers can give the acquiring company an opportunity to grow market share without
having to really earn it by doing the work themselves - instead, they buy a competitor's
business for a price.
• To save the margins added by the suppliers to the cost’s companies go for vertical
mergers. This may also be applicable in cutting the distributers cost.
• Companies go for M&A deals also to eliminate future competition and gain a larger
share in in its product market.
• If the technological changes in a particular industry is very fast, then the companies go
for M&A deal as strategic realignment and to adopt the technological change.
• Some companies also go for M&A for tax reduction, as merging will substantially
reduce the tax bill of the company

Mergers and acquisitions present attractive opportunities but are also risky. These mergers and
acquisitions don’t succeed every time as the deals fail because of many reasons. Some of the
reasons for the failure of M&A is lack of funding by the acquirer to close the deal, the
difference in the valuation estimates by the parties and government intervention due to
regulations. So, before an acquisition, it is important for a company to its strategic and financial
goals. Moreover, the strategy during M&A should be such that there is cultural integration
between the two companies. Corporate culture is a binding agent- “Culture is important to take
into account when identifying a target, in the due diligence phase and in the integration phase.”

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Important consideration should be taken in account
• The company must be willing to take the risk and vigilantly make investments to benefit
fully from the merger as the competitors and the industry take heed quickly

• To reduce and diversify risk, multiple bets must be made, in order to narrow down to
the one that will prove fruitful

• The management of the acquiring firm must learn to be resilient, patient and be able to
adopt to the change owing to ever-changing business dynamics in the industry

Stages Involved in Merges and Acquisition

• Phase 1: Pre-acquisition review: this would include self-assessment of the acquiring
company with regards to the need for M&A, ascertain the valuation (undervalued is the
key) and chalk out the growth plan through the target.

• Phase 2: Search and screen targets: This would include searching for the possible apt
takeover candidates. This process is mainly to scan for a good strategic fit for the
acquiring company.

• Phase 3: Investigate and valuation of the target: Once the appropriate company is
shortlisted through primary screening, detailed analysis of the target company must be
done. This is also referred to as due diligence.

• Phase 4: Acquire the target through negotiations: Once the target company is
selected, the next step is to start negotiations to come to consensus for a negotiated
merger or a bear hug. This brings both the companies to agree mutually to the deal for
the long term working of the M&A.

• Phase 5: Post merger integration: If all the above steps fall in place, there is a formal
announcement of the agreement of merger by both the participating companies.

Reasons for failure for Merges and Acquisition

• Poor strategic fit: Wide difference in objectives and strategies of the company

• Poorly managed Integration: Integration is often poorly managed without planning

and design. This leads to failure of implementation

• Incomplete due diligence: Inadequate due diligence can lead to failure of M&A as it is
the crux of the entire strategy

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 • Overly optimistic: Too optimistic projections about the target company leads to bad
decisions and failure of the M&A

About Bharati Airtel

Bharati Airtel Limited, also known as Airtel is an Indian telecommunications company based
in Delhi India. It operates in 18 countries across South Asia and Africa, and also in the Channel
Islands. Airtel provides GSM, 3G, 4G LTE, 4G+ mobile services, fixed line broadband and
voice services depending upon the country of operation. Airtel had also rolled out its VoLTE
technology across all Indian telecom circles. It is the third largest mobile network operator in
India and the second largest mobile network operator in the world with over 293.79 million
subscribers. They have 4 business divisions, mobile services, home services, Airtel business
and digital tv business.

All these services are rendered under a unified brand 'airtel' either directly or through subsidiary
companies. The Enterprise business provides end-to-end telecom solutions to corporate
customers and national and international long-distance services to telcos. The company also
deploys owns and manages passive infrastructure pertaining to telecom operations under their
subsidiary Bharti Infratel Ltd. Bharti Infratel Ltd own 42% of Indus Towers Ltd. Bharti Infratel
Ltd and Indus Towers Ltd are the largest passive infrastructure service providers for telecom
services in India. Bharti Airtel Ltd was incorporated in the year 1995 with the name Bharti
Tele-Ventures Ltd. The company was promoted by Bharti Telecom Ltd a company
incorporated under the laws of India. The name of the company was changed from Bharti Tele-
Ventures to Bharti Airtel Ltd with effect from April 24, 2006 in order to reflect their brand
essence objective and the nature of their business activities. During the year 1995-96 the
company launched mobile services under the brand name 'Airtel' for the first time in Delhi and
Himachal Pradesh.

Bharti Airtel Ltd was incorporated in the year 1995 with the name Bharti Tele-Ventures Ltd.
The company was promoted by Bharti Telecom Ltd, a company incorporated under the laws
of India. The name of the company was changed from Bharti Tele-Ventures to Bharti Airtel
Ltd with effect from April 24, 2006 in order to reflect their brand essence, objective and the
nature of their business activities.

Recently in the news, Airtel was reported to be the fastest mobile broadband network, while
speed on Reliance Jio network was the slowest in July. The report, compiled based on Speed

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test Intelligence data collected by Ookla between August 2018 and July 2019, shows mobile
broadband speed on the Vodafone Idea network has gradually improved.

Another article says that Airtel is upping its ante in broadband services. It has reportedly
updated three of its V-Fiber plans, offering subscribers up to 1000GB of additional data on
these plans along with some additional benefits of Airtel Thanks.

About Tata Teleservice

Tata Teleservices Limited (TTSL) is an Indian broadband and telecommunications service
provider based in Mumbai, Maharashtra, India. It is a subsidiary of the Tata Group, an Indian
conglomerate company. It operates fixed line services under the brand name Tata Tele
Broadband in various telecom circles of India.

The company has been at the forefront of redefining the telecom experience in India, launching
innovative products and services, playing an enabling role in simplifying consumer lives and
expanding digital inclusion.

The company offers integrated telecom solutions to its customers across wireline and wireless
networks on GSM, CDMA & 3G platforms. In 1996, Tata Teleservices Limited was the pioneer
of the CDMA technology platform in India. It embarked on a growth path after the acquisition
of Hughes Tele.com (India) Limited [renamed Tata Teleservices (Maharashtra) Limited] by
the Tata Group in 2002.

Being a part of the Tata Group, where customer-centricity is a way of life, the company
revolutionised mobile voice calling through its philosophy of ‘pay per use’ in 2009. This
initiative has been widely hailed as one of the biggest customer centric initiatives by any
telecom operator in India. In November 2010, Tata Teleservices Limited became the first
private telecom operator to launch 3G services in India.

Over the years, Tata Teleservices Limited has been a key driver of the telecom revolution in
the country. Tata Teleservices Limited is one of the most reliable telecom service providers for
its integrated voice and data services and is also a key player in mobile data usage segment.
Tata Teleservices Limited is a market leader in the Enterprise space with a wide range of
products and services, and numerous innovations across business verticals. It provides next
generation Voice, Data and Managed solutions to large and small medium enterprises through
its wide optic fibre network, channel partner network, dedicated sales and service teams. Tata

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Teleservices is one of the most awarded brands in India for marketing excellence. Its brands,
Tata Docomo and Tata Photon, have consistently been recognized at the most prestigious
marketing forums like Abbys, Effies and Emvies for the outstanding creative and digital
marketing programs.

About the Industry

The telecommunications sector is comprised of companies that provide the infrastructure for
data transmission and communications. This includes wireless and cell phone service
providers, some types of Internet service providers and fiber optic networks among other
things. Unlike the other sectors, the telecommunications sector has only one major industry
group, which is called telecommunications services. The telecom sector does not include
companies that broadcast radio and TV, provide cable or satellite TV or manufacture cell
phones and computers. Companies that broadcast or provide cable are classified in consumer
discretionary and companies that manufacture cell phones and computers are in the information
technology sector.

India Telecommunication Market

India has emerged as the fastest growing telecom market in the world. The tele density was just
1.4 per cent in 1995, by 2019 it rose 91.45. In big cities like Delhi, Mumbai, Kolkata and
Bengaluru, it has gone up much the same as in Europe and North America. However, the tele
density in rural India have rose around 5674%. India is the second largest mobile market in the
world. The total number of telephone subscribers in India reached 1186.63 million as on 30
June 2019.

Indian telecom industry underwent a high pace of market liberalisation and growth since the
1990s and now has become the world's most competitive and one of the fastest growing telecom
markets. The Industry has grown over twenty times in just ten years, from under 37 million
subscribers in the year 2001 to over 846 million subscribers in the year 2011.India has the
world's second-largest mobile phone user base with over 1157.04 million users as of July 2019.

Telecommunication has supported the socioeconomic development of India and has played a
significant role to narrow down the rural-urban digital divide to some extent. It also has helped
to increase the transparency of governance with the introduction of e-governance in India. The
government has pragmatically used modern telecommunication facilities to deliver mass
education programmes for the rural folk of India.

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Frameworks
SWOT
Strength

The debt and cash-free deal not only helped Tata Group reduce its losses, but also helped Bharti
Airtel acquire 44 million clients in one stroke.

Also, Tata Teleservices has Huge customer potential in India, High growth rate, High return of
investment and low expenditure capital.

Weakness

For Airtel, the danger of inclusion was greater as the firm merged with another telecom
company, Telenor India, simultaneously.

Airtel had to integrate Telenor India’s employees, customers, and spectrum simultaneously
with Tata’s CMB employees, customers, and spectrum and this created an integration risk for
the company

The company is late adopters of the new technology which is one of biggest weakness and the
company has poor telecom infrastructure.

Opportunities

Airtel has purchased the CMB from Tata and this purchase has helped Airtel increase its
subscriber base to maintain its position. Tata also has the opportunity to reshape its
telecommunications company without being shut down.

Another big asset housed under Tata Communications Ltd. another telecom company promoted
by the Tata Group is the overseas cable business, which will help Airtel expand its presence in
the enterprise space.

Mobile telephony dominates the Indian telecom market with 98% market share. The number
of telephone subscribers in the country increased to 119.2 crore in October 2019, from 119.14
crore in September 2019, according to subscriber data released by the Telecom Regulatory
Authority of India (Trai).

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Threat

High level of Competitors: Disruptive entry of Jio pulled down the competitiveness of the
telecom providers and led to a decrease in the profit margin of the existing operator

Porter’s 5 Force Model

Competitive Rivalry:

• Customers’ low switching cost and price sensitivity are increasing competition among
players
• High exit barriers are also intensifying competition
• There are more than 15 players in the market leading to intense competition for example
in Airtel, Vodafone, Jio and idea are the competitors

Threat of New Entrants:

• Strict government regulations
• Extremely high infrastructure setup cost
• Difficulty in achieving economies of scale

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Threat of Substitute Products
• Hardly any threat of substitute products as there is no substitute available in the
market
Bargaining Power of Suppliers
• High bargaining power of suppliers as there are just a few suppliers in the sector
like Amphenol,TE Connectivity etc.
• High cost of switching to suppliers

Bargaining Power of Customers

• Low switching cost and mobile number portability give customers high
bargaining power
• Customers are price sensitive
• And due to high competition costumer prefer low price services.

PESTEL
PESTEL stands for Political, Economic, Social, Technology, Environment and Legal factors.
It’s a framework used by marketers to monitor macro- environmental factors that could impact
the organisation. The factors are used to identify threats and weaknesses to diagnose the
organisation better.

POLITICAL:

The traditional political risks for telecom are the ones related to regulations, network licensing,
national radio spectrums and in case of certain nations trade barriers. Generally, these issues
affect the organisations more and customers hardly feel the impact or face consequences.
However, one factor that worked in the favour of the telecom industry was privatization and
deregulation. For some time, the telecom industry enjoyed relative freedom based upon its
importance in the process of globalization. Another issue cropping up is increased focus on
China and India. Hence the level of government control is increased.

Political risks include national security and human rights. Governments across the world have
launched measures to monitor and control communications motivated by political and security
reasons. These measures have grown tougher in the aftermath of the terrorist attacks on US and
hacking attempts on the US government’s databases.

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Bharati Airtel is focused on security concerns before launching 5G network across the country.
5G is believed to be a matter of geopolitics and a matter of technology with trust in Huawei or
Nokia.

Example: China’s Huawei is under pressure across the world due to alleged security concerns
due to its perceived proximity to the Chinese government and fighting to gain trust of countries
like India, though the issue is downplayed claiming it to be “a technical issue, not a political
one

Bharti Airtel has entered into a partnership with Symantec Corporation to protect businesses in
India from online threats. The partnership comes amid a spike in cyber attacks over the past
few months, including ransomwares such as Petya and WannaCry that disrupted systems across
the world.

The government of India unveiled the National Digital Communication Policy in September
2018. This initiative will attract US$ 100 billion worth of investments and would generate 4
million jobs by 2022 in the telecommunication sector. Airtel have already tied up with foreign
partner SINTEL which will invest in infrastructure and technology to provide best services to
subscribers.

The FDI limits were hiked by the ministry of telecom industry from 49% to 71%. This enabled
Indian promoters of telecom sector to compete and consolidate by selling stakes to foreign
entities. Due to which Airtel will be able to modulate the foreign stakes in the company that
have already acquired stakes between 67-69% of their assets.

With increase in globalisation, Airtel invested in Sri Lanka in 2009 and is currently investing
to expand its network with latest technology in 5 years. Recently Airtel have also acquired Zain
for Africa operations which is the second biggest overseas purchase by an Indian company.

ECONOMIC:

Economic factors play an important role in analysis. Recession has an impact on telecom
organisations as people cut back on spending on telecom spending. Usage of landlines also
witness a fall during recession. The happier is the economy, the higher will be consumer
spending on any product or service. These economic trends are also supported by technological
changes.

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Interest rates, inflation, and taxes affect the telecommunication industry. Expenses affect the
pricing per plan offered to customers too. As more houses are built, the need for
telecommunication resources increase. This can drive prices (plus revenue) up depending on
location, amount of customers in an area, and the need for telecommunication services.

Jobs are opening up increasingly in telecommunication industry. Customer service

representatives are hired to solve problems via website live chat. Marketers, writers, and media
managers handle online marketing and campaigns. Graphic designers and programmers are
necessary to create websites for computers and mobile users.

SOCIAL FACTORS:

Customers have become cautious on the kind of telecom services to choose. They want good
offers and packages as there is an increased usage of internet and talk time. Most jobs require
internet these days and it is important to the employee to have access to the web on the go.
Wifi and internet are a daily part of life. Customers wish the government to acknowledge the
internet as a basic human right. It’s required for education and many careers. Even applying to
a job is an online experience; going to a company website and uploading a resume on their
servers is essential.

The demand for high speed broadband is increasing among youth, Airtel being the leading
private broad band service provider in the country has introduced the ultra-fast speed of 50
Mbps for the broadband users on next generation VDSL2 technology which will allow users,
the convenience to download a full feature film in less than 3 minutes.

Due to increasing competition in the telecom industry, tariffs have been reduced. To counter
this Airtel has introduced many low tariff plans like youth Plan for young people, ladies special,
and friend’s prepaid plan, family celebration plan according to the requirements of the different
customer segments. Segmentation strategy aims towards understanding the need gaps of
specific consumer segments and creating special segmented products for them.

TECHNOLOGY:

Needs and requirements of telecom industry is advancing like telephone companies install fiber
wire in their builds over copper now. Phones are becoming more compact, moving the telecom
business into a primarily wireless business.

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Basic needs in smartphones, like voicemail, caller ID, and messaging are covered. Now people
want internet access on the go. So, data is added to mobile plans. Wi-Fi has been built into
buses and cars too.

This ‘need’ leads to more investments in companies who hold a strong influence over telecom
developments in computers, smartphones, and laptops.

Since the increase in FDI limits, there has been a lot of increase in technology and
infrastructure, as Airtel is well established, it provides improved services to its customers.

Introduction of Mobile Number Portability (MNP) which allows the consumer to retain their
existing mobile number, even when they change the service provider. This will increase the
competition among the service providers as the subscribers can change their network if they
are not happy with the services of the existing service provider. Airtel has the edge over his
competitors as their services are much better than other service providers.

ENVIRONMENT:

Airtel is committed to doing its bit to protect the environment, protecting natural environment
is high on CSR agenda. It has a programme called Green Network.

During the year, Airtel partnered with its tower companies, which helped convert indoor sites
to outdoor sites. Over 12,500 sites have been converted to outdoor, thus reducing the energy
consumption of these sites by about 25%. Sites are converted mostly installing FCU for
switching off the Aircon, thus making them feasible for installing green energy solutions like
solar and Li-ion, among others.

Bharti Infratel (Infratel) has been working closely with Airtel for removing Aircon from sites.
This year, over 3,600 sites were converted to outdoor, using FCU and micro-cooling solution,
making 6,000 sites outdoor till date.

The increasing volume of waste generated by the telecommunication sector has been a matter
of grave concern. Airtel, as one of the leading companies of telecommunication sector,
manages both physical and e-waste, generated from its premises. The Company has adopted a
proactive approach by ensuring end-to-end traceability and recycling of waste. Airtel
continuously monitors the waste generation at each stage and track the procedure of waste
disposal.

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Airtel proves to be socially responsible by taking some decent steps as a loyal citizen of India.
For any country; its growth depends upon the education percentage of country and Indian
literacy rate is a bit low. Considering this, Airtel is providing quality education to poor and
underprivileged children.

LEGAL:

Due to the rising terrorist activities and hacking of confidential data, the Indian Department of
Telecommunications (DoT) has made amendments related to security features which states that
telecom companies must have good policies for security, and they must be responsible for
security of the network. Political risks include national security and human rights.
Governments across the world have launched measures to monitor and control communications
motivated by political and security reasons. These measures have grown tougher in the
aftermath of the terrorist attacks on US and hacking attempts on the US government’s
databases.

Bharati Airtel is focused on security concerns before launching 5G network across the country.
5G is believed to be a matter of geopolitics and a matter of technology with trust in Huawei or
Nokia.

Competitor Analysis
Currently, as of June 2019, Bharti Airtel has a customer base of 383.37 million subscribers in
India. By entering into a Merger and acquisition deal with TTSL in 2017, Bharti Airtel further
acquired 45 million more subscribers. But Airtel, if it needs to survive in the telecom sector, it
needs to pay close attention to its closest competitors such as Vodafone - Idea and Reliance.
These two companies are an immediate threat to Airtel.

Some of the competitors to airtel are:

1. Reliance
2. Vodafone - Idea
3. BSNL
4. MTNL

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 Slno. company No. of % of
subscribers market
(In share
millions) held

June 2019 June

2019
1. Bharti 383.37 32
Airtel-
TTSL
2. Reliance 340 29
Jio
3. Vodafone 320 27
- Idea
4. BSNL 115.95 8
5. MTNL 3.41 1.37
total 842.73 97.37

From the above table, it can be said that, for Bharti Airtel along with the acquired TTSL, it has
a customer base of 383.37 million against Vodafone-Idea which boasts of 320 million and
Reliance Jio which has 340 million customer base. The customer base of BSNL is 115.95
million and MTNL has 3.41 million. The customer base for all these telecom companies, is not
calculated only for mobile connection but for the overall services offered by the telecom
industry. Such as 4G internet, DTH connection, Set top box etc. Airtel may have the highest
customer base, but still it is almost impossible to compete against Jio. Vodafone-Idea and Airtel
are on par against each other. The reason why JIO is the fiercest competitor is because, the
customer base built by Airtel is done in a span of 24 years that is from 1995 its inception and
till today 2019. But Jio has done the same in only 11 years, if we take out the acquired
customers from acquiring TTSL, the customer base of Airtel alone will be less than Jio. BSNL
and MTNL are not a threat at all for the Airtel, since BSNL and MTNL have reported
continuous losses, especially MTNL which even has a negative equity. The market share
currently as of June 2019 is the highest for Airtel which has 32%. Whereas Jio stands at second

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place with 29% market share and Vodafone-Idea has 27% and BSNL and MTNL has 8% and
1.37% respectively. Rest of the market share is held by other telecom companies in India. By
2021 it has been forecasted that, Jio will be controlling 45% market share for the telecom sector
which has come as a shocking news for Bharti Airtel. So, from the above it can be concluded
that Vodafone-Idea and Reliance Jio are immediate threat to Bharti airtel.

Principal strategic aspects Unique to the organisation/situation.

The Merger deal:

During October 12th, 2017, Bharti Airtel announced the acquisition of TTSL. It was a debt-free
and cash-free deal. Due to continuously sustaining losses, Tata suffered a negative value which
resulted in creation of negative equity. The debt of TTSL for March 31st, 2017 stood at
Rs.340.89 billion, excluding deferred payment liabilities to the government for spectrum. The
total cost of deferred payment spectrum was Rs.100 billion out of which Bharti Airtel bore
Rs.15 billion of the total unpaid spectrums.

Strategic challenges faced during the merger:

The integration risk was pretty much high for Airtel because at a similar time it had also
acquired Telenor India as well. Telenor was acquired in 2017 February. Because Airtel entered
into an acquisition deal to acquire Telenor, it had to acquire 7 circles of Telenor operations
situated in Andhra Pradesh, Bihar, Maharashtra, Gujarat, UP (East), UP (West) and Assam.
This gave a huge boost to Airtel, which boasted itself of 44 million newly acquired customers.
Airtel had to integrate Telenor’s customers, employees and spectrum simultaneously along
with Tata’s TTSL and TTML customers, employees and spectrums. This created a literal
critical integration risk for the Airtel company. Even though it acquired multiple companies at
the same time, still Bharti Airtel overcame the difficulties of M&A deal. Majority of the times
M&A deals are fated to fail, but even though Airtel acquired multiple companies at the same
time it still succeeded and is running smoothly presently.

Acquisition in a Strategic perspective:

In the year 2017 onwards, India is the second largest Telecom market in the World with over
1 billion mobile subscribers. The telecom industry went into a major peril because of the entry
of the Reliance Jio. Due to the strategy of the Jio, the competitive edge of the other Telecom

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companies gradually declined which also led to the decline in profit margin. Small operators
unable to withstand the rampage of Jio, entered into a massive wave of Mergers and
Acquisitions in the telecom industry. Because of the Jio alone Airtel had to acquire Tata’s CMB
to boost its subscriber base and to maintain its competitive edge to withstand the Reliance
onslaught.

Individual Analysis
Veena Shravani-18113
After the merger of Airtel and Tata tele Services will increase customer base for Airtel. This
eventually increases revenue as the synergy can help increase value to customers present.

The telecom sector is becoming increasingly competitive. Due to which many companies are
entangles in a cut-throat competition to provide the best service in the country. Airtel and other
competitors in the industry are now pushed out of their comfort zone to constantly innovate.
Recently Airtel released advanced 4G network in Bengaluru, the deployment will result in a
superior 4G experience for Airtel customers through considerably faster data speeds and better
coverage – indoors and outdoors. Customers with mobile devices that support 4G Advanced
will be able to enjoy 4G data speeds of up to 135 Mbps.

Due to the increased awareness of security of teleservices, Airtel now has taken up measures
for security of the services rendered. The telecommunication’s industry is under constant threat
of terrorism and cyber-attacks, so Airtel announced first-of-its-kind partnership with Symantec
Corp. (Nasdaq: SYMC), the world’s leading cyber security company, to serve the growing
cyber security requirements of businesses in India, providing protection and prevention of
online threats in an increasingly digitally connected world. This creates jobs opportunities as
citizens of India specialised in cyber security have a better chance at livelihood.

The telecom sector indirectly creates jobs as growth is dependent on the market (customers)
and technological advancements. Businesses are using the internet and mobile phones for
marketing. They create social media pages, advertisements on sites, and digital marketing
campaigns to reach customers around the world.

Since the government has increased FDI limit, this would lead to improved infrastructure which
in turn would lead to job creation. Improved telecommunications infrastructure would also lead
to better services to rural areas, this will reduce isolation farming productivity and access to
educational and medical services.

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Increased FDI is very beneficial to the country as it helps develop backward areas, human
resource improvement with exchange of knowledge and skills, access to latest technology and
improved capital flow. Currently SingTel, a telecommunication company od Singapore is
planning to invest in Airtel to clear debt.

Nisarga Ganesh-18116
For, Airtel, the merger brings with it added revenue market share at virtually no cost. About 40
million TATA consumers directly joined Airtel network. While Mergers and Acquisition is
good for industry, employees’ stable jobs and competitive remuneration, control & fraud
connections, real time activation for subscribers by mandatory digital verification using
Aadhaar, better for subscribers it would mean less discounts as the level of competition
diminishes. Mergers and Acquisition would bring increased pricing correction for Telco’s.
Subscribers can hope to be benefited from service providers that are on a stronger footing to
invest in network expansion and quality of service. As data usage grows, operators need
billions of dollars in fresh investments to meet user demands. The three-player market
excluding BSNL should make the finest balance of competition and investment. The market
Mergers and Acquisition would likely to help “ARPU” per User, Return on Equity and
encourage infrastructure-based competition. The industry will see Mergers and Acquisition
benefits of reduced competitive intensity, stable long-term realizations and significant
improvement in capital formation.

With regard to economic efficiency and depending upon the extent of compatibility and
complimentarily between merged firms, merger activities should lead to economies of scale
and scope. Whether a merger is successful or not depends to what extent thee benefits are
achieved. However, broadly, the result of the various study concludes that mergers have not
resulted in any significant improvement in the performance of merged firms. Hence it is good
for the companies to choose other ways rather than M&A.

Shashank-18119
Bharti Airtel is an expert when comes to M&A deal because, according to a research conducted
by Harvard Business Review (HBR) 70% to 90% of the companies have a high risk of failing
to carry out the M&A process successfully. Bharti Airtel went into merger deal with several
companies simultaneously and successfully executed the deal. Therefore, Airtel has got a
choice to enter into more deals to increase its market share and grow successfully in the future.
According to US brokerage firm Jeffries, Reliance Jio is expected to touch 45% of market share

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becoming the top ranked telecom company in India. Airtel is expected to retain its 2nd position
with a 31% market share and Vodafone-Idea is believed to drop down to 21% market share.

Shruthi-18122
Bharati Airtel merged with the consumer mobile business (CMB) of Tata Tele Services (TTSL)
and Tata Tele Services (TTML) with the two Bharati Group Companies. This move will spell
a better synergies and better consumer base for the country’s third largest mobile service
provides. All customers, assets, spectrum, and agreed liabilities of consumer mobile business
of TTSL and TTML has stood merged with Airtel, this move will lead to better network
utilization as spectrum will now be with Bharati Airtel which will enhance the consumer base

This merge will bolster Airtel’s spectrum pool with significant additional 178.5-megahertz
(MHz) spectrum in 1800,2100 and 850 MHz bands which is widely used for 4G. The merge
also includes transfer of all customers and assets of TTSL CMB to Airtel. This deal will also
allow the Tata Group to rid itself of the loss-making mobility business, which has been a drag
on its finance

This merge is more about a deal which is on a no-deal, no-cash basis, where Airtel will not be
taking over any of the debt of Tata teleservices. As a part of the merge, Airtel will absorb Tata
Teleservices CMB operation in 19 telecom circles 17 under TTSL and 2 under Tata
Teleservices. Airtel will also take small portion of the unpaid spectrum liability pf Tata
Teleservices. This merge also will make the customers and assets stronger

This merge will be done to strengthen 4G network capacity and to bridge the cap in the
subscriber’s base between the telecom leaders

Vikas-18126
Bharti Airtel Limited (Airtel), India's leading telecom company, announced a debt-free cash-
free merger agreement with Tata's Consumer Mobile Businesses (CMB), Tata Teleservices
Limited (TTSL) and Tata Teleservices Maharashtra (TTML) on October 12, 2017. The merged
entity would have an estimated 31.9% of the subscriber base and 40.6% of the
telecommunications industry's income market share. This agreement finished a 20-year-old
saga of Tata's CMB's strategic mistakes and losses. On the merger, Airtel Chairman Sunil
Bharti Mittal (Mittal) said, "This is a important development towards further consolidation in
the Indian phone sector and it further strengthens the business position of Airtel in several

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important circles, and the agreement generates important long-term value for shareholders
considering the important synergies

THE DEAL

Airtel announced on October 12, 2017 the purchase of Tata's CMBs (TTSL and its TTML
subsidiary). The deal was free of debt and free of cash. After considering the ongoing losses,
Tata's had a adverse value, resulting in negative equity. The enterprise value was therefore
zero, and all previous liabilities and duties had to be resolved by Tata when it came to debt.
TTSL and TTML's total debt as at March 31, 2017 stood at Rs. 340.89 billion, excluding
deferred public spectrum payment liabilities. Airtel bore Rs. 15 billion of unpaid spectrum
payments out of the total estimated deferred spectrum cost of Rs. 100 billion of Tata's

THE CHALLENGES

Industry analysts felt that the danger of inclusion for Airtel was greater as the firm merged with
another telecom company, Telenor India, simultaneously. Telenor was purchased by Airtel in
February 2017. Telenor's activities in seven circles–Andhra Pradesh, Bihar, Maharashtra,
Gujarat, UP (East), UP (West), and Assam–had to be acquired as part of the merger agreement.
This merger gave it a client boost in the 1800 MHz band in seven circles of 44 million and 43.4
MHz spectrum holdings. Airtel had to simultaneously integrate Telenor India's staff, clients
and spectrum with Tata's CMB staff, clients and spectrum, creating an inclusion danger for the
business

LOOKING FORWARD

At the end of 2017, India was the second largest telecom market in the world with more than 1
billion phone subscribers (see Exhibit III Industry Telephone Subscribers). Jio's disruptive
entry has placed the sector under severe economic stress. This approach knocked down the
telecom providers ' competitiveness and led to a decline in the current operators ' profit margin.
Operators with less market share were unable to resist the attack by Jio and a wave of mergers
and acquisitions began in the telecommunications industry. Airtel has purchased CMB from
Tata and this purchase has helped Airtel increase its subscriber base to maintain its position.
The merger of Idea and Vodafone, however, brought Airtel down to number two

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Recommendation and Conclusion
• Since Airtel is an expert in M&A deal, in the near future it can think about acquiring
BSNL and MTNL. By acquiring BSNL and MTNL, it can increase its subscriber base
by nearly 120 million more people.
• Since Reliance Jio is growing at an alarming rate, if at all it is possible, Airtel should
enter into a collaboration with Jio, because Jio’s growth rate is increasing at a massive
rate year-on-year
• Like the Vodafone zoo zoos campaign, Airtel should come up with similar creative
advertisements.
• By entering into a M&A deal with the TTSL, Bharti Airtel made the right choice
because, it has given Airtel some strength to compete against Reliance Jio
• Airtel should pay a close attention to Reliance Jio and Vodafone-Idea, as they have a
huge potential to compete against Airtel and the former company even has the ability
to become the future market leader.

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