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African Safari

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DIFFERENCE BETWEEN

MERGER AND ACQUISITION

When one company takes over another and clearlyestablishes itself as the new owner, the purchase is calledan acquisition. From a legal point of view, the target

company ceases to exist, the buyer "swallows" the businessand the buyer's stock continues to be traded.

In the pure sense of the term, a merger happens when two

firms agree to go forward as a single new company ratherthan remain separately owned and operated

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MOTIVES BEHIND MERGER AND

ACQUISITION

Increased revenue or market share: This assumes that

the buyer will be absorbing a major competitor and thus

increase its market power (by capturing increased market

share) to set prices.

Economy of scale: This refers to the fact that the

combined company can often reduce its fixed costs byremoving duplicate departments or operations

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Synergy

For example, managerial economies such as the

increased opportunity of managerial specialization.

Another example are purchasing economies due to

increased order size and associated bulk-buying discounts.

Taxation: A profitable company can buy a loss maker to

use the target's loss as their advantage by reducing theirtax liability.

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About Bharti Airtel

Bharti Airtel is Asias leading integrated telecom servicesproviders with operations in India, Sri Lanka and Bangladesh.

The Company is divided into 4 business units that are:1. Mobile

2. Telemedia (Broadband, IPTV and Telephoneservices)

3. Enterprise (End-to-End telecom solutions)

4. Digital TV (Direct-to-Home TV)

Sunil Bharti Mittal is the Chairman & Managing Director of

Bharti Airtel Ltd. head quartered at New Delhi, India.

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What is the Deal?

Bharti Airtel has made an offer to buy the African Asset

of Kuwaits Zain Telecom for $10.7 Billion. Zain board

has approved the offer.

This deal will fire Bhartis global ambitions and will

catapult it to become the worlds seventh largest mobilephone company by subscribers.

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Contd..

The combined subscriber base of Bharti and Zains

African Assets will be 164 million.

Financially, the market value of the combined entitywill be just under $42 billion, with annual revenues of

more than $12 billion and profits nearly $2 billion.

Cash and assets will be under $3 billion.

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Bharti Airtel Hits

Indias largest telecom firm, Bharti Airtel Ltd, has affirmed

its ambitions to expand beyond India by buying a 70%

stake in Bangladeshs fourth largest telecom firm, Warid

Telecom International Ltd.

REASONS

Declining revenue per subscriber has forced Bharti Airtelto look for firms in overseas markets with higher average

returns. Last year, it tried to buy South Africas MTN

Group Ltd, but failed.

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AMOUNT OF INVESTMENT MADE

Bharti will initially invest $300 million (Rs1,362 crore) in

Warid to expand its operations. The firm will gain control of

Warids board and daily operations, while current owners,the Dhabi Group, will hold the remaining 30% stake

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Recent Scenario

Legal dispute over Zain Nigeria threatens to disrupt Bharti-

Zain deal.

Funding Mechanics

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Conclusion

This deal opens up opportunities for Bharti Airtel

in African telecom market and puts it in directcompetition with MTN.