M&A In 2007
The year saw some big-ticket mergers in the aviation and telecom sectors. In February, the world's largest telecom company, the UK-headquartered Vodafone, bought a controlling 67 per cent stake in Hutchison Essar Ltd--India's second largest mobile services company--to get a share of the Indian telecom pie and extend its telecom empire to the world's fastest growing telecom market. With many more global biggies in the line, some of whom (like AT&T) have applied for new telecom licences, a few acquisitions in this space may happen in the near future.
The aviation sector is where the mother of this year's acquisitions took place. The biggest and most talked about was Jet Airways' takeover of Air Sahara. The merger, which broke off last year, was formalized this year to create India's biggest carrier. This pushed the government to clear the merger of 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 the acquisition of the common man's airline Air Deccan by Kingfisher Airlines. This is expected to spell the end of low-cost air travel by Indians. A further consolidation in this sector cannot be ruled out.
The Battle For Spectrum
The fiercely fought battle for spectrum (or airwaves used by mobile service companies) continued unabated this year with more players coming into the ring to get a share of the booty. While earlier, the fight was between the GSM players (Airtel, Vodafone etc) and CDMA operators (Reliance Communications, Tata Indicom), the latest episodes of the telecom saga has many more players who have applied for licences to get into the sector. According to reports, 46 companies had filed 575 applications for licences. Now the battle is over who should get spectrum on a priority and at what price, as the existing players are totally opposed to the 2001 price of Rs. 1,651 crore for a licence and assured spectrum to newcomers even as some of the existing ones have been waiting for additional spectrum for several months.
The existing operators on both sides are also fighting over the mode of allotting spectrum for 3G services that enables people to download video, graphics and music at very high speeds. While the regulator TRAI has recommended a system of auction, many operators have expressed their reservations over this mode of allotment as well as over allowing new entrants, including foreign players, to participate in the auction on the grounds that it could lead to irresponsible bidding by players which would not only make 3G services more expensive but also lead to spectrum hoarding by non-serious players who are coming into the sector only for its market value.
With some of the players approaching the court to get a settlement, the government had appointed a special committee to find a solution to the issue. However, earlier this month, the committee expressed its inability to come out with anything conclusive. It is up to the government to take a call on the matter now.
Stock Market Boom
In January 2007, it was difficult to believe that we would close the year with the Sensex above the 20,000 mark, but with the economy on the high and the GDP growing by close to 9 per cent, the Sensex kept on growing steadily from the level of 14,000 in January to 15,000 in August and then zooming to cross 20,000 in just three months.
The market rally, say experts, has been pushed by an increased exposure by foreign institutional investors (FIIs) who are extremely upbeat on the great India success story. FII inflows into the country increased by 82.85 per cent to Rs 66, 813.60 crore compared with last year's Rs 36,539.70 crore. Barring a minor 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, FII inflows 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 of the analysts, including foreign analysts expect this story to continue and see the Sensex at around the 25,000 mark by the middle of 2008.