Merger Between Robi and Airtel Pros and Cons

An assignment on— "Merging of Robi and Airtel - study of pros and cons from client's point of view"

Submitted to— Ms. Ireen Akhter Course Instructor Management of Organizations (Course Code:W501 )

Submitted by: Name

Class ID

A.R.M. Mozaffar Hossain

ZR 24

A.K.M. Meherajul Hasan Bhuiyan

ZR 17

Date of Submission— 6th September, 2016

Institute of Business Administration University of Dhaka Nilkhet Road, Dhaka -1000

MERGER The combination of one or more corporations, LLCs, or other business entities into a single business entity; the joining of two or more companies to achieve greater efficiencies of scale and productivity. Companies merge to join forces with another company to reap the rewards that come from the combined strengths. There are different types of merger. The merger of this discussion Airtel and Robi falls into the category of Horizontal merger. It is the type of merge between two competitors within the same industry. Robi and Airtel signed a merger agreement on January 28, this year. As per the deal, the joint venture will be operated under the brand name of “Robi”. A smart business merger can help business enter a new market, reach more customers, freeze out a competitor or fill a gap in your company's abilities. Mergers can get business on the fast track to become more competitive. With a complementary partner, business can acquire new products, distribution channels, technical knowledge, infrastructure or cash to propel to a new level of success. ROBI AND AIRTEL MERGER: QUICK FACTS Robi Started operation: March, 2010 Parent company: Axiata Group (92%). NTT Docomo (8%) Total Subscribers: 26.8 million Spectrum allocation: 19.8 Mhz Market share: 20.7%

Airtel: Started operation: December, 2010 Parent company: Bharti Airtel (100%) Total subscribers: 9.35 million Spectrum allocation: 20Mhz Market share: 7.2%

After Merger Application for merger to BTRC: January, 2016 Approval given: September, 2016 Total Subscriber: Market Share: Spectrum Allocation: Merger fee: 100 Crore BDT Company ownership: Axiata: 68.3% Bharti Airtel 25% NTT Docomo 6.7% Merger guidelines:  The new merger will operate under the brand name of ROBI  Axiata will take management control. Bharti Airtel will assume minority stake.  The new entity will have to pay a sum of 507 crore BDT if they intend to use the full spectrum.  The new entity will have to pay further 33.8 for each Mega hertz (MHz) airtel’s 2G spectrum to be used by Robi.  After the merger, the merged company cannot sell any 016 coded number for more than 2 years.  the merged entity will have to ensure Voluntary Retirement Scheme (VRS) lawfully, no one would be sacked without acknowledgement of the regulator.  Robi won’t be able to change tariff plan of Airtel for two years after the merger.  Total number 13 restrictions to be followed by the merger entity. Figure 1: Quick facts: Robi and Airtel Merger

MERGER PROS AND CONS Advantages: The advantages for this merger will include— 

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The combined entity after merger will become the second largest mobile operator of Bangladesh with market share of 27.9%. Grameenphone 43.75%. Strong market follower reduces the opportunity for the leader to manipulate or monopolize the market. The merged entity will have control over 10,000 towers which will be a competitive advantage within the industry. The combined allocation of spectrum which is 39.8 Mhz is the highest among the competitors. While data service is deemed to be the future of mobile industry, this allocation gives them a competitive advantage provided they pay fees for the merge of bandwidth allocation. With any merger comes the opportunity to enter new market and share of knowledge and technology. The merger between Robi and Airtel will serve the same.

Disadvantages: The downside of the merger could be— 

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Competitors with small market share can sometimes take aggressive stance against the market leader and that can drive down prices. Airtel merging with Robi will result in no financially sound competitor who can compete with Grameenphone with aggressive intent. The merged entity can exercise high service charge from their subscribers because of its higher market share. Along with Grameenphone and and newly merged entity can dictate the pulse of the market which can work against price reduction. Even though there is a clause against employee lay off in this merger. However, Robi and Airtel both offering Voluntary Retiremenet Scheme. This type of events within organization allows result in employee dissatisfaction.

REFERENCES Hussain, I. (2016, September 6). merger robi cannot sell airtel's number for two years. Retrieved from dhakatribune: http://www.dhakatribune.com/business/2016/08/08/merger-robi-cannotsell-airtel-numbers-two-years/ Mergers. (2016, Septemeber 6 ). Retrieved https://www.entrepreneur.com/encyclopedia/mergers

from

entrepreneur.com:

mobile phone subscribers bangladesh july. (2016, September 6). Retrieved from btrc.gov.bd: http://www.btrc.gov.bd/content/mobile-phone-subscribers-bangladesh-july-2016