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Vodafone Revenue At Rs 19,000 Cr, Down By 16%; Blames GST, New And Old Telcos

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Vodafone India, the Indian arm of Vodafone Plc today announced its financial results for the first half period of fiscal 2018 and posted revenues of Rs 19,002 crore, a drop of 15.8% over the same period a year ago.

The company has attributed this decline to multiple factors that included a new operator – Reliance Jio -, incumbent operators -Bharti airtel, Idea Cellular, seasonality as well as GST.

By the end of the period, Vodafone India’s operating cash flow was at Rs 1543 crore and the company’s capex investment stood at Rs 2915 crore.

For the period till 30 September 2017, the company’s total subscriber base reached 207 million, a growth of 3% over previous year, with rural subscriber base of 114 million. The company has a total of 140,000 telecom sites out of which, it claims to have 128,000 3G and 4G sites.

Despite the stiff competition, Vodafone claims to have increassed its revenue market share by 0.6% over the same period a year ago, to touch 23.1%.

The company’s ARPU (average revenue per user) stood at Rs 146.

Vodafone Business Services, the enterprise services arm of Vodafone India, is contributing 19% of the company’s total revenue or Rs 3610 crore approximately.

By the end of the half year, the company had a total of 67.7 million data users of which close to 45 million consume more than 1 MB data per day. The company said it added 10 million new broadband users during the peiod and completed the acquisition of You Broadband, a fixed line broadband operator.

M-Pesa, Vodafone India’s digital wallet, has reached a customer base of 13.58 million by the end of this reported period.

Vodafone India and Idea Cellular, the Number 2 and Number 3 operators in India respectively, have already announced their merger and the companies are expecting a closure by the end of March 2018.

The company said it has already received approvals from CCI, SEBI and Stock Exchanges and the merger is ‘on track’.

To quicken this merger and to create a better synergy, both the companies last week announced to sell off their individual tower assets to American Tower for $1.3 billion.

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M&A

Qualcomm Out-rightly Rejects Broadcom’s $130 Bn Proposal

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Qualcomm, the largest chip maker for mobile devices, has rejected the $130 billion acquisition proposal of Broadcom saying no one is better than it to lead the mobile devices ecosystem. It was a unanimous decision by the board of directors to reject Broadcom’s proposal.

Broadcom, the US-based semiconductor firm, last week, had shown interest to buy the Snapdragon maker at a value of $70 per share in the acquisition proposal that would consist of $60 in cash and $10 per share in Broadcom shares.

“It is the Board’s unanimous belief that Broadcom’s proposal significantly undervalues Qualcomm relative to the Company’s leadership position in mobile technology and our future growth prospects,” said Paul Jacobs, Executive Chairman and Chairman of the Board of Qualcomm Incorporated.

“No company is better positioned in mobile, IoT, automotive, edge computing and networking within the semiconductor industry. We are confident in our ability to create significant additional value for our stockholders as we continue our growth in these attractive segments and lead the transition to 5G,” said Steve Mollenkopf, Chief Executive Officer of Qualcomm.

“The Board and Management are singularly focused on driving value for Qualcomm’s shareholders. After a comprehensive review, conducted in consultation with our financial and legal advisors, the Board has concluded that Broadcom’s proposal dramatically undervalues Qualcomm and comes with significant regulatory uncertainty. We are highly confident that the strategy Steve and his team are executing on provides far superior value to Qualcomm shareholders than the proposed offer,” said Tom Horton, Presiding Director for the San Diego based chip maker.

The Broadcom’s valuation was 28% higher over the closing price of Qualcomm common stock on November 2, 2017 and 33% higher than its average valuation over the preceding one month period.

The combined revenue of the three firms in question – Qualcomm, Broadcom and NXP – is expected to touch $51 billion in FY 2017 with EBIDTA of aroud $23 billion, forecasts the semiconductor fiem, justifying its proposal. It also said that Silver Lake Partners is interested in putting in $5 billion to support the transaction.

Broadcom had also said this proposal of buying Qualcomm would stay put irrespective of the outcome of the latter’s pending acquisition of NXP.

 

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M&A

American Tower Buys Vodafone And Idea’s Telecom Towers For $1.2 Bn

American_Tower

The US based telecom infrastructure company American Tower is acquiring the telecom towers of Vodafone India and Idea Cellular for $1.2 Billion or Rs 7850 crore. The company is buying a total of 20,000 telecom towers belong to the two firms that are set a for a merger.

“The aggregate cash consideration for the transactions is expected to be Rs 78.5 billion, or approximately $1.2 billion at current exchange rates, subject to customary closing adjustments,” said the US based tower company that had earlier acquired Viom Networks, another Indian tower company.

As part of the transactions, Vodafone and Idea Cellular would get the service level and process efficiency benefits from American Tower, means these two telecom operators would continue to get usual service from these tower sites.

Similarly, American Tower will have certain preferential rights for future new business commencements on its existing portfolio and on the sites being acquired in certain Indian markets.

Jim Taiclet, American Tower’s Chief Executive Officer stated, “We expect the addition of these two high quality portfolios to be highly complementary to our existing assets and to contribute to long-term leasing growth as India’s leading mobile operators accelerate their 4G network deployments.”

The transactions are expected to generate approximately Rs 21 billion (approximately $320 million) in property revenue and approximately Rs 8 billion (approximately $120 million) in gross margin during their first full year in American Tower’s portfolio, at current exchange rates. Further, SG&A associated with the assets is expected to be less than Rs 1 billion (approximately $10 million) for the first year. The transactions are expected to be immediately accretive to AFFO per share, are subject to customary closing conditions and regulatory approval and are expected to close in the first half of 2018.

Amit Sharma, American Tower’s EVP and President, Asia and Chairman of the Board, ATC TIPL, added, “We are extremely pleased to partner with Vodafone and Idea to help expand mobile broadband services across India while furthering our participation in the Digital India initiative.”

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M&A

Broadcom Wishes To Buy Qualcomm For $130 Bn With No Questions Asked

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Broadcom, one of the world’s largest semiconductor firms, has offered $130 billion to buy Qualcomm, the largest chip maker for plethora of smart communication devices.

The San Jose based Broadcom has offered a value of $70 per share of Qualcomm in the acquisition proposal that would consist of $60 in cash and $10 per share in Broadcom shares.

This valuation is 28% higher over the closing price of Qualcomm common stock on November 2, 2017 and 33% higher than its average valuation over the preceding one month period.

The combined revenue of the three firms in question – Qualcomm, Broadcom and NXP – is expected to touch $51 billion in FY 2017 with EBIDTA of aroud $23 billion, forecasts the semiconductor fiem, justifying its proposal. It also said that Silver Lake Partners is interested in putting in $5 billion to support the transaction.

Broadcom also said this proposal of buying Qualcomm would stay put irrespective of the outcome of the latter’s pending acquisition of NXP.

“Broadcom’s proposal is compelling for stockholders and stakeholders in both companies. Our proposal provides Qualcomm stockholders with a substantial and immediate premium in cash for their shares, as well as the opportunity to participate in the upside potential of the combined company,” said Hock Tan, President and Chief Executive Officer of Broadcom. “This complementary transaction will position the combined company as a global communications leader with an impressive portfolio of technologies and products. We would not make this offer if we were not confident that our common global customers would embrace the proposed combination. With greater scale and broader product diversification, the combined company will be positioned to deliver more advanced semiconductor solutions for our global customers and drive enhanced stockholder value.”

Qualcomm on Monday confirmed of receiving the proposal from Broadcom.

“The Qualcomm Board of Directors, in consultation with its financial and legal advisors, will assess the proposal in order to pursue the course of action that is in the best interests of Qualcomm shareholders,” Qualcomm said in a statement. “Qualcomm will have no further comment until its Board of Directors has completed its review.”

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M&A

RCom Sells-off Big TV DTH Business To Veecon Group

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There are a lot of development at Anil Ambani-led Reliance Communications and the Reliance Group these days. The latest one is the company has decided to sell off its DTH business, Reliance Big TV, to Veecon Group, a Delhi based firm that hass interests in media, construction and, majorly, security infrastructure.

“Reliance Communications Limited (RCOM) today entered into binding Memorandum Of Understanding with Veecon Media and Television Limited, for sale of its subsidiary Reliance BIG TV Limited (RBTV), engaged in the business of Direct to Home (DTH) services across India,” the company said in a filing in the BSE.

The company said, pursuant to the transaction, the buyer will acquire the entire shareholding of RBTV with business on “as-is where-is” basis, along with all existing trade liabilities and contingent liabilities. The existing DTH license of BIG TV shall be renewed with the submission of the required Bank Guarantees with the Ministry of Information and Broadcasting by the buyer.

Reliance BigTV has more than 1.2 million customers across the nation and there are concerns if the company would be able to serve in the coming times or they have to switch their service provider, just like its mobile subscribers had to.

“The transaction ensures that all existing 1.2 Million customers of RBTV shall continue to enjoy uninterrupted services. It also ensures the continuity of employment for approximately 500 employees of RBTV,” RCom said in the statement.

The transaction will help reduce the liability of unsecured creditors, benefitting all stakeholders including lenders and shareholders of RCom.

“The transaction is in consonance with the RCom’s stated objective to focus on B2B businesses of New RCom. The successful culmination of the transaction is subject to the requisite approvals from licensors, regulatory authorities and lenders of RCom,” added the company.

In the last week of October the company announced the closure of its mobile services business, means, it would no more provide voice services on its 2G and 3G network. Going forward the company would focus only on data services and that too to enterprise customers.

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M&A

Airtel To Demerge OFC Business With Telesonic For Rs 4565 Cr

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In the wake of growing declining profit and devastating impact of Reliance Jio, Bharti Airtel is planning to transfer its optical cable business to Telesonic Networks for a minimum value of Rs 4564.7 crore.

The company said its board of directors in its meeting held on 31 October has ‘approved the scheme of arrangement between Bharti Airtel Limited and Telesonic Networks Limited and their respective shareholders and creditors for the transfer of the optical fiber cable business of the Transferor company to the Transferee company, a subsidiary of the Transferor company, by way of a slump sale,” Airtel informed the BSE in a filing.

Telesonic Networks is a wholly owned subsidiary of Bharti Airtel and is engaged in the business of designing, planning, deploying and managing broadband and fixed telephone networks.

The turnover of Telesonic, though a part of Airtel’s total turnover, has never been reported separately. So, the company said, the exact valuation would not be possible.

“Since separate financial statements of the optical fiber cable business are not prepared, total turnover/revenue/income of such optical fiber cable business being transferred is not ascertainable,” added the note.

Airtel said the minimum price to transfer the optical fiber business to Telesonic is Rs 4564.7 crore. This business unit of Airtel involves underground and over ground cable network of the company.

However, it is subjected to upward adjustments on account of incremental capital expenditure, working capital etc till the deal closure date. It also added that the overall value will not exceed Rs 5650 crore.

The parent company, Airtel, said it is completely a cash deal and no share transfer is involved in the transaction.

“The transaction does not envisage issue of shares by the Transferee company (Teleseonic Networks) and shall be discharged by the Transferee company in cash. Accordingly there would not be any change in the shareholding pattern of the Transferor company (Bharti airtel) or the Transferee company,” Airtel said in the filing.

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M&A

HP Completes Acquisition Of Samsung’s Printer Business For $1.05 bn

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Global technology major HP Wednesday announced that it has completed the acquisitions of Samsung Electronics’ printer business for a deal value of $1.05 billion. The acquisition announcement was done a year ago.

“As we ignite a renaissance in printing, we’re thrilled to bring together the industry’s best and brightest talent,” said Dion Weisler, President and CEO, HP Inc. “Together, we will build on more than 30 years of print leadership to accelerate our strategy, disrupt new market opportunities, and provide our customers and partners with unique and highly innovative print solutions.

The multifunction A3 printers represent HP’s largest growth opportunity in business printing. The combination with Samsung expands HP’s portfolio, accelerates its ability to disrupt the $55B A3 copier segment with superior multifunction printing technology, and strengthens its leading A4 laser printing business. Samsung also brings compelling intellectual property of more than 6,500 print patents and a world-class workforce of nearly 1,300 researchers and engineers with expertise in laser technology, imaging electronics and supplies and accessories.

As part of the agreement, Samsung will be making a $100 million to $300 million equity investment in HP through open market purchases.

With Samsung, HP now offers the industry’s strongest portfolio of A3 multifunction printers that deliver the simplicity of printers with the high performance of copiers. The fully integrated portfolio, including next generation PageWide technologies, offers opportunities to grow managed print and document services as sales models shift from transactional to contractual. Customers will have greater choice, reliability and uptime, with lower cost of ownership and more affordable color. The combined portfolio also features unmatched security such as HP Connection Inspector, HP Sure Start, Run-time intrusion detection and whitelisting, making them the world’s most secure printers.

The world’s largest printer company said it will provide more financial guidance on its Q4 2017 earnings call.

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CorporateResults

Airtel Profit Dips 77% In Q2, To Decrease Further in Q3 Due To IUC Cut

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The financial stress in the Indian telecom industry shows no sign of recovery as country’s largest operator Bharti Airtel on Tuesday posted more than 76% dip in its net profit for Q2 ended September 2017.

The company posted a net profit of Rs 343 crore for September quarter, 2017 as against Rs 1461 crore in the same period a year ago, showing a decrease of 76.5%

It can be recalled that Reliance Jio had launched its services, offering all services free of cost, exactly at the same time last year. This free offering has badly impacted all Indian operators irrespective of their size.

If we look at net profit of the company from a six-month period, Airtel earned Rs 710 crore from April to September 2017 compared to Rs 2923 crore in the same period in 2016, showing a plunge of 75.7%.

In terms of revenue, country’s largest telco made a sales of Rs 21,777 crore in Q2, 2017 as against Rs 24,652 crore in the same period a year ago – a decrease of 11.7%.

“The financial stress in the industry continues due to double digit revenue decline and will be further accentuated by the reduction in IUC rates in the next quarter,” said Gopal Vittal, MD and CEO, India & South Asia.

He was referring to the cut in the IUC (interconnect usage charge) cut recommended by TRAI that reduced the IUC to 6 paise from 14 paisa.

“This will eventually force operator consolidation and exits as we have witnessed in the recent past. Airtel remains committed to its goal of increasing revenue market share in this competitive environment by providing superior customer experience and strategically investing behind building more data capacities,” he added.

India revenues for Q2’18 at Rs 16,728 crore have declined by 13.0% Y-o-Y primarily led by mobile drop of 16.8% Y-o-Y. Mobile market continues to experience value erosion and financial stress led by competitive pressures. Mobile data traffic has grown fourfold to 784 Bn MBs in the quarter as compared to 178 Bn MBs in the corresponding quarter last year. Mobile broadband customers increased by 33.6% to 55.2 Mn from 41.3 Mn in the corresponding quarter last year.

From mobile subscriber point of view Airtel has a total of 383.5 million customer worldwide that includes its Africa operations as well.

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AnnouncementsCorporate

Samsung Rejigs Top Leadership, Retains 3 CEO Structure

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Samsung Electronics on Tuesday announced new leadership to steer the electronics major to new phase of growth and appointed 3 new CEOs to head different business units.

Retaining its 3-CEO structure, Samsung appointed Kinam Kim as head of the Device Solutions (DS) Division who replaced Vice Chairman Oh-Hyun Kwon – the current top leader of the firm. Similarly, Hyunsuk Kim was appointed as head of the Consumer Electronics (CE) Division replacing President Boo-Keun Yoon and Dongjin Koh was selected to head the IT & Mobile Communications (IM) Division in place of Jong-Kyun Shin.

“The next generation of leaders are well suited to accelerate the pace of innovation and address the demands of the connected world. They have proven track records with extensive experience and outstanding expertise in their fields,” Kwon said.

Kinam Kim joined the Company in 1981 and is an IEEE fellow and renowned authority in semiconductors, having served as the head of Samsung Advanced Institute of Technology; CEO of Samsung Display; head of the Memory, System LSI Businesses and until now was responsible for the overall semiconductor business.

HS Kim is a leading expert in display products, having played a major role in the Company achieving the top position in global TV sales for the 11th consecutive year with numerous display technology breakthroughs.

DJ Koh has recently delivered solid results in the mobile business, having overseen the development of its flagship Galaxy smartphones with differentiated products and services, based on his vast experience as the previous head of mobile R&D.

Separately, President Sang-Hoon Lee, the current CFO,  will leave his position and has been recommended by outside Board members to be Chairman of the Board and succeed Mr. Kwon next March. This would mark the first time that the Company will separate the Chairman of the Board and the CEO roles.

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M&A

Bharti Infratel To Acquire Indus Towers, To Be World’s Largest Tower Firm

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Bharti Infratel, the tower business arm of Bharti Airtel, is eyeing to acquire Indus Towers, world’s largest telecom towers company.

“The board of directors of Bharti Infratel in their meeting held on October 30 has decided to explore and evaluate acquisition of stake in one or more tranches in Indus Towers, with the aim of making it a subsidiary or wholly owned subsidiary of Bharti Infratel,” Infratel said Monday in a statement.

If this happens, Bharti Infratel is going to be the largest telecom towers company, not only in the country but in the world with excess of 160,000 towers.

At present Indus has 123,000 towers where as Bharti Infratel has 39,264 towers.

At the current shareholding structure, Bharti Infratel and Vodafone India hold 42% stake each in Indus Towers. The remaining 16% stake was once held by Idea Cellular but the ADitya Birla firm had recently sold 4.85% stake to Providence Equity Partners and holds just 11.15% stake now.

If Airtel’s tower arm acquires Indus Towers, as per its own admission, it may acquire the firm completely or would like to go for a majority stake.

The sell off of Indus became imperative as two of its founding partners – Vodafone and Idea Cellular – are in the middle of a merger talk and it would close somewhere in 2018. In the merger contract, Vodafone’s stake in Indus is not a part of the deal. So it had to be offloaded.

On 30 October Bharti Infratel announced its quarterly results. It posted revenues of Rs 3648 crore in Q2 2017 as against Rs 3292 crore in the same period a year ago showing a growth of 11%.

On half year basis the company’s revenue grew by 10%. In first half year of 2017, Bharti Infratel posted revenues of Rs 7172 crore compared to Rs 6503 crore in H2, 2016.

In terms of profit, however, the company showed poor results. It reported net profit of Rs 638 crore in September quarter of 2017 compared Rs 774 crore in the same period a year ago.

This earnings figures are the consolidated revenue and profit figures of Bharti Infratel that also include earnings from Indus Towers where Bharti Airtel has 42% stake.

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