I had blogged a while ago on the Shale gas technology and how is it gonna be the future of oil industry. (see Shale Gas Technology ). The announcement from Reliance Industries Ltd. (RIL) for buying of 45% share in Pioneer Natural Resources, a company involved in shale extraction, for $ 1.3 billion gives some credence to that. This comes close on heels of similar acquisition by RIL for $ 1.7 billion in the another US company's shale-gas assets in Pennsylvania.
The reason for sudden interest for RIL in such technology is probably because India supposedly has lot of shale assets and as this technology matures (the cost of extraction gets cheaper), a petrochemical company like RIL would be best suited to exploit the situation.
Showing posts with label M&A. Show all posts
Showing posts with label M&A. Show all posts
Friday, June 25, 2010
Thursday, January 14, 2010
Analyzing Bharti's acquisition of Warid' Telecom
Bharti Telecom recently acquired a 70% stake in Bangladesh' Warid Telecom. This post of mine tries to dissect the acquisition and see how the financials make up. The post also throws other strategic factors which make up for this acquisition.
Please note that I had limited time finding out the answers and I do not have access to any paid subscription or reports which could have thrown a more accurate results and analysis.
Without much ado, let us start.
1. Market Players-
Bangladesh market is comprised of 6 big players with top 3 accounting for 88% of the market. Almost all these companies have some foreign tie up to help them out with technology and funds. The following table shows the players and their subscriber base. (Data from Bangladesh Regulatory Authority)
From the above table, the percentage market share of Warid' Telecom appears pretty less. Now, lets add another data.
2. Average Growth
If we track when each of these mobile operators commenced their operations and combine that with number of subscribers, we should get following-
As can be seen, the top players had a first-mover advantage but if we track the average additions per month, Warid comes second to Grameen. This shows the potential that Warid has in terms of growth rate.
3. Betting on Bangladesh
This is interesting, as following table would show - Bangladesh market is under-penetrated and is bound to increase going forward. If it reaches the current level of mobile penetration for India (46%) in next 4 years, it would open up 23 mn more subscribers and at 20% market share for Warid, this should be 4.6 mn subscribers.
4. Calculating whether it makes sense for Bharti
Putting down assumptions as stated below, we arrive at NPV for this aquisition-
As can be seen, since this is positive NPV, so it is right decission for Bharti.
Most of the M&A analysis is about getting the assumptions right. Would love to hear from readers on the assumptions made.
Besides this there are multiple synergy factors which have not been taken into account in the analysis above-
1. Bangladesh' mobile market is similar to Indian market in terms of customer preference, demography etc. It would be relatively easier for an Indian company like Bharti to make a growth plan similar to the one they charted for India in Bangladesh.
2. Singtel has stake in both Bharti and Bangladesh Telecom. So there should be some synergy there as well.
3. Bharti would be able to leverage its existing set of suppliers viz Nokia, Siemens for better deals compared to existing players in Bangladesh.
Please note that I had limited time finding out the answers and I do not have access to any paid subscription or reports which could have thrown a more accurate results and analysis.
Without much ado, let us start.
1. Market Players-
Bangladesh market is comprised of 6 big players with top 3 accounting for 88% of the market. Almost all these companies have some foreign tie up to help them out with technology and funds. The following table shows the players and their subscriber base. (Data from Bangladesh Regulatory Authority)
From the above table, the percentage market share of Warid' Telecom appears pretty less. Now, lets add another data.
2. Average Growth
If we track when each of these mobile operators commenced their operations and combine that with number of subscribers, we should get following-
As can be seen, the top players had a first-mover advantage but if we track the average additions per month, Warid comes second to Grameen. This shows the potential that Warid has in terms of growth rate.
3. Betting on Bangladesh
This is interesting, as following table would show - Bangladesh market is under-penetrated and is bound to increase going forward. If it reaches the current level of mobile penetration for India (46%) in next 4 years, it would open up 23 mn more subscribers and at 20% market share for Warid, this should be 4.6 mn subscribers.
4. Calculating whether it makes sense for Bharti
Putting down assumptions as stated below, we arrive at NPV for this aquisition-
As can be seen, since this is positive NPV, so it is right decission for Bharti.
Most of the M&A analysis is about getting the assumptions right. Would love to hear from readers on the assumptions made.
Besides this there are multiple synergy factors which have not been taken into account in the analysis above-
1. Bangladesh' mobile market is similar to Indian market in terms of customer preference, demography etc. It would be relatively easier for an Indian company like Bharti to make a growth plan similar to the one they charted for India in Bangladesh.
2. Singtel has stake in both Bharti and Bangladesh Telecom. So there should be some synergy there as well.
3. Bharti would be able to leverage its existing set of suppliers viz Nokia, Siemens for better deals compared to existing players in Bangladesh.
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