Reliance bids to become global rival to Vodafone
Reliance, India’s second largest mobile phone company and flagship of the Reliance Anil Dhirubhai Ambani Group, announced that it has bought Vanco, the bankrupt virtual telecoms operator, and that it is discussing a possible merger with MTN, Africa’s largest mobile phone operator.
Andrew Coppel, the restructuring expert brought in to liquidate Vanco, said the company had been sold for “less than face value due to the secure creditors.” The creditors, led by Lloyds TSB, will get some of their money back. Shareholders may get little or nothing.
Speed was essential, said Coppel, to retain valuable Vanco customers such as British Airways, Ernst & Young, Siemens and Avis Europe. It is not clear whether other possible buyers, such as Cable & Wireless and BT, entered bids for the company. Vanco Direct USA is being sold separately.
Reliance and MTN
The Vanco acquisition is a minor matter compared to the possibility of a merger between Reliance and MTN. Reliance has a market value of $27.5 billion, a country-wide digital network in India, a global fibre optic cable system, and 50 million customers. MTN is worth about $38 billion and has more than 68 million customers across 21 countries in Africa and the Middle East.
It is very far from a done deal. Bharti Artel, India’s largest mobile operator, blamed bad faith on the part of MTN for the recent failure of merger talks between the two companies. Vodafone’s attempt last year to buy the 50 percent it does not already own of Vodacom, another leading South African mobile company, fell through because MTN backed out of buying Vodacom’s fixed line business.
Comments about the negotiating tactics of MTN are likely to be expressed very carefully, given that MTN’s chairman is Cyril Ramaphosa, a dominant member of the executive committee of the ruling African National Congress party.
Vodafone in India
Vodafone, meanwhile, is due to announce record gross earnings (EBITDA) of around £13.2 billion, up from £11.96 last year, largely resulting from its acquisition last year of Indian mobile operator Hutchinson Essar, as well as from data growth outside its sluggish European core business.
The results vindicate CEO Arun Sarin, who nearly lost his job two years ago when institutional investors expressed no confidence in his acquisition strategy and voted against his re-election to the board. Since then his gambles in Turkey, Eastern Europe and now India have all paid off.
With each company buying into the other’s back yard, we may expect competition between Reliance and Vodafone to feature in ITC news for the foreseeable future.
