The telecom sector put up an impressive show in terms of mergers and acquisitions in India during 2017. In fact, it registered the highest yearly deal value of $14.7 billion among all sectors in the past 10 years. This is also a more than fivefold increase in deal value over 2016. The majority of the transactions were domestic in nature, accounting for 92 per cent of the sector’s deal value and 58 per cent of the deal count.

Year of consolidation

The Indian telecom industry has been facing stiff competition, with tariff wars hitting company bottom lines. This has put a heavy drag on company balance sheets, especially as they continued spending agg­ressively on spectrum acquisition and infra­structure development. The situation worsened in September 2016 when Reliance Jio Infocomm Limited (RJIL) entered the market and shook up the sector by offering free voice and data services. This forced the incumbents to cut tariffs drastically, exerting further pressure on their revenues and profitability. All these factors triggered the long-awaited consolidation in the sector, precipitating merger announcements by some players and exits/buyouts by others.

The year 2017 started with Bharti Air­tel agreeing to buy Norway-based Tele­nor’s India unit in February to augment its subscriber base and network. This deal came amid fierce competition and followed merger discussions between the Vodafone Group’s India unit and Idea Cellular Limi­­ted. The final $11.6 billion merger agreement between Vodafone India and Idea was signed in March 2017, wherein both the players agreed to combine their India operations (excluding Vodafone’s 42 per cent stake in Indus Towers). The merged entity will be India’s largest telecom operator in terms of revenue and subscribers.

Just three days after the Vodafone-Idea merger announcement, Bharti Airtel Limited agreed to buy Tikona Digital Networks’ 4G business, including its broadband wireless access spectrum and 350 cellular sites in five telecom circles for $244.5 million.

At the beginning of the fourth quarter, Tata Teleservices Limited and Tata Tele­services (Maharashtra) Limited agreed to merge their consumer mobile business with Bharti Airtel, thus enabling the Tata Group to quit the loss-making consumer mobile business and focus on the enterprise business.

Towards the end of 2017, RJIL agreed to buy the wireless spectrum, tower assets, optical fibre network and media convergence node assets of Reliance Communi­ca­­tions for an undisclosed amount. Mean­while, amid consolidation in the telecom operator space, some deal activity was also seen in the telecom tower segment -Vodafone India and Idea sold their tower businesses to the American Tower Corporation for $1.2 billion. Apart from this, there were discussions for the potential sale of Reliance Infratel and Tower Vision to private equity players.


With the current wave of consolidation, the Indian telecom market will shift from a fragmented industry with multiple operators to a more balanced market with three to four strong players in the long term. The industry is likely to be more stable with tariff wars easing up, and companies focusing on assembling their merged entities and realising synergies from them.

The year 2018 is expected to be an important one for telecom players with consolidation taking firm shape and the new National Telecom Policy set to be announced soon. The industry is likely to witness acquisitions and tie-ups aimed at adopting new technologies and moving to new business models, such as building internet of things (IoT) capabilities and entering the mobile virtual network operator market to build new revenue streams and take on competition.

In addition, owing to significant pressure on cash flows and their stretched capital situation, telecom operators are expected to look at monetising their tower assets to strengthen their balance sheet. Further, the government’s recent efforts in terms of easing the spectrum cap from 25 per cent to 35 per cent and removing the 50 per cent cap on total spectrum holding, as well as allowing 100 per cent foreign direct investment through the automatic route will drive merger deals and transactions leading to changes in the existing shareholder patterns. s

Based on EY’s recently released “Transactions Annual Report on M&A Deal Activity in 2017 and Outlook for 2018”