Will Indian Telecom sector M&A activity shrink in 2009?

For Indian telecom’s M&A story, 2009 will be all about making meaningful acquisitions where firms looking at India and Indian firms planning to buy overseas will look for clear value. The year ahead may not present too many huge billion dollar plus deals, but the M&A saga will continue. The paucity of funds will be a deterrent and that is expected to bring in deals with more competitive valuations.

By all counts, 2009 will be a year which will be characterised by limited access to funds and valuations that are likely to be more compelling. The symptoms were actually being felt this year which had its fair share of deals with a ticket value of $1 billion.

Among them were Norway’s Telenor deciding to pick up a 60% stake in Unitech for $1.2 billion and the more recent instance of Japan’s NTT DoCoMo acquiring a 26% stake in unlisted Tata Teleservices for $2.7 billion.

The total value of all telecom M&A deals for 2008 has been just over $9 billion which was less than half of the $22 billion clocked for 2007, according to Thomson Reuters’ data. The year 2007 witnessed the sale of Hutchison’s telecom business in India to Vodafone for $10.8 billion. This accounted for a huge chunk of the $22 billion.

Interestingly, 2008 has been a year that witnessed the entry of new operators like Etisalat, Telenor and NTT DoCoMo. Consolidation in telecom accounted for one-third of the total M&As in the country. The largest of around 20 deals this year was Japanese major NTT DoCoMo's purchase of a 26 per cent stake in Tata Teleservices. In another deal, Dubai-based Emirates Telecommunications Corp (Etisalat) bought a 45 per cent stake in Swan Telecom in cash for USD 900 million.
But 2009 may see M&A activity to emerge in infrastructure business. Please CLICK HERE to read related article.