M&A Inc

M&A In 2007
The year saw some big-ticket mergers in the aviation and telecom sectors. InFebruary, the world's largest telecom company, the UK-headquartered Vodafone,bought a controlling 67 per cent stake in Hutchison Essar Ltd--India's secondlargest mobile services company--to get a share of the Indian telecom pie andextend its telecom empire to the world's fastest growing telecom market. Withmany more global biggies in the line, some of whom (like AT&T) have appliedfor new telecom licences, a few acquisitions in this space may happen in thenear future.

The aviation sector is where the mother of this year's acquisitions tookplace. The biggest and most talked about was Jet Airways' takeover of AirSahara. The merger, which broke off last year, was formalized this year tocreate India's biggest carrier. This pushed the government to clear the mergerof Indian and Air-India in March and set up the National Aviation Co of India.But what could possibly change the aviation landscape in India is theacquisition of the common man's airline Air Deccan by Kingfisher Airlines. Thisis expected to spell the end of low-cost air travel by Indians. A furtherconsolidation in this sector cannot be ruled out.

The Battle For Spectrum
The fiercely fought battle for spectrum (or airwaves used by mobile servicecompanies) continued unabated this year with more players coming into the ringto get a share of the booty. While earlier, the fight was between the GSMplayers (Airtel, Vodafone etc) and CDMA operators (Reliance Communications, TataIndicom), the latest episodes of the telecom saga has many more players who haveapplied for licences to get into the sector. According to reports, 46 companieshad filed 575 applications for licences. Now the battle is over who should getspectrum on a priority and at what price, as the existing players are totallyopposed to the 2001 price of Rs. 1,651 crore for a licence and assured spectrumto newcomers even as some of the existing ones have been waiting for additionalspectrum for several months.

The existing operators on both sides are also fighting over the mode ofallotting spectrum for 3G services that enables people to download video,graphics and music at very high speeds. While the regulator TRAI has recommendeda system of auction, many operators have expressed their reservations over thismode of allotment as well as over allowing new entrants, including foreignplayers, to participate in the auction on the grounds that it could lead toirresponsible bidding by players which would not only make 3G services moreexpensive but also lead to spectrum hoarding by non-serious players who arecoming into the sector only for its market value.

With some of the players approaching the court to get a settlement, thegovernment had appointed a special committee to find a solution to the issue.However, earlier this month, the committee expressed its inability to come outwith anything conclusive. It is up to the government to take a call on thematter now.

Stock Market Boom
In January 2007, it was difficult to believe that we would close the year withthe Sensex above the 20,000 mark, but with the economy on the high and the GDPgrowing by close to 9 per cent, the Sensex kept on growing steadily from thelevel of 14,000 in January to 15,000 in August and then zooming to cross 20,000in just three months.

The market rally, say experts, has been pushed by an increased exposure byforeign institutional investors (FIIs) who are extremely upbeat on the greatIndia success story. FII inflows into the country increased by 82.85 per cent toRs 66, 813.60 crore compared with last year's Rs 36,539.70 crore. Barring aminor blip due to the ban imposed by the Securities and Exchange Board of India(SEBI) on participatory notes issued by FIIs and foreign funds in October, FIIinflows continue to increase. The move was designed to help stem large inflows,which have pushed the rupee up against the dollar and fuelled liquidity. Most ofthe analysts, including foreign analysts expect this story to continue and seethe Sensex at around the 25,000 mark by the middle of 2008.