The Main Idea

One plus one makes three: this equation is the special alchemy of a merger or an acquisition.
The key principle behind buying a company is to create shareholder value over and above that of
the sum of the two companies. Two companies together are more valuable than two separate
companies - at least, that's the reasoning behind M&A.

This rationale is particularly alluring to companies when times are tough. Strong
companies will act to buy other companies to create a more competitive, cost-efficient
company. The companies will come together hoping to gain a greater market share or to
achieve greater efficiency. Because of these potential benefits, target companies will
often agree to be purchased when they know they cannot survive alone.

Distinction between Mergers and Acquisitions

Although they are often uttered in the same breath and used as though they were
synonymous, the terms merger and acquisition mean slightly different things.

When one company takes over another and clearly established itself as the new
owner, the purchase is called an acquisition. From a legal point of view, the target
company ceases to exist, the buyer "swallows" the business and the buyer's stock
continues to be traded.

In the pure sense of the term, a merger happens when two firms, often of about the
same size, agree to go forward as a single new company rather than remain separately
owned and operated. This kind of action is more precisely referred to as a "merger of
equals." Both companies' stocks are surrendered and new company stock is issued in its
place. For example, both Daimler-Benz and Chrysler ceased to exist when the two firms
merged, and a new company, DaimlerChrysler, was created.

In practice, however, actual mergers of equals don't happen very often. Usually, one
company will buy another and, as part of the deal's terms, simply allow the acquired firm
to proclaim that the action is a merger of equals, even if it's technically an acquisition.
Being bought out often carries negative connotations, therefore, by describing the deal as
a merger, deal makers and top managers try to make the takeover more palatable.

A purchase deal will also be called a merger when both CEOs agree that joining
together is in the best interest of both of their companies. But when the deal is unfriendly
- that is, when the target company does not want to be purchased - it is always regarded
as an acquisition.

Whether a purchase is considered a merger or an acquisition really depends on

whether the purchase is friendly or hostile and how it is announced. In other words, the
real difference lies in how the purchase is communicated to and received by the target
company's board of directors, employees and shareholders.

Synergy

Synergy is the magic force that allows for enhanced cost efficiencies of the new
business. Synergy takes the form of revenue enhancement and cost savings. By merging,
the companies hope to benefit from the following:
 • Staff reductions - As every employee knows, mergers tend to mean job losses.
Consider all the money saved from reducing the number of staff members from
accounting, marketing and other departments. Job cuts will also include the
former CEO, who typically leaves with a compensation package.
• Economies of scale - Yes, size matters. Whether it's purchasing stationery or a
new corporate IT system, a bigger company placing the orders can save more on
costs. Mergers also translate into improved purchasing power to buy equipment or
office supplies - when placing larger orders, companies have a greater ability to
negotiate prices with their suppliers.
• Acquiring new technology - To stay competitive, companies need to stay on top
of technological developments and their business applications. By buying a
smaller company with unique technologies, a large company can maintain or
develop a competitive edge.
• Improved market reach and industry visibility - Companies buy companies to
reach new markets and grow revenues and earnings. A merge may expand two
companies' marketing and distribution, giving them new sales opportunities. A
merger can also improve a company's standing in the investment community:
bigger firms often have an easier time raising capital than smaller ones.

That said, achieving synergy is easier said than done - it is not automatically realized
once two companies merge. Sure, there ought to be economies of scale when two
businesses are combined, but sometimes a merger does just the opposite. In many cases,
one and one add up to less than two.

Sadly, synergy opportunities may exist only in the minds of the corporate leaders and
the deal makers. Where there is no value to be created, the CEO and investment bankers -
who have much to gain from a successful M&A deal - will try to create an image of
enhanced value. The market, however, eventually sees through this and penalizes the
company by assigning it a discounted share price. We'll talk more about why M&A may
fail in a later section of this tutorial.

Varieties of Mergers
From the perspective of business structures, there is a whole host of different mergers.
Here are a few types, distinguished by the relationship between the two companies that
are merging:

• Horizontal merger - Two companies that are in direct competition and share the
same product lines and markets.
• Vertical merger - A customer and company or a supplier and company. Think of a
cone supplier merging with an ice cream maker.
• Market-extension merger - Two companies that sell the same products in different
markets.
• Product-extension merger - Two companies selling different but related products
in the same market.
• Conglomeration - Two companies that have no common business areas.

There are two types of mergers that are distinguished by how the merger is
financed. Each has certain implications for the companies involved and for
investors:
 o Purchase Mergers - As the name suggests, this kind of merger occurs
when one company purchases another. The purchase is made with cash or
through the issue of some kind of debt instrument; the sale is taxable.

Acquiring companies often prefer this type of merger because it can

provide them with a tax benefit. Acquired assets can be written-up to the
actual purchase price, and the difference between the book value and
the purchase price of the assets can depreciate annually, reducing taxes
payable by the acquiring company. We will discuss this further in part
four of this tutorial.
o Consolidation Mergers - With this merger, a brand new company is
formed and both companies are bought and combined under the new
entity. The tax terms are the same as those of a purchase merger.

What is a stock-for-stock merger and how does this corporate action affect existing
shareholders?

First, let's be clear about what we mean by a stock-for-stock merger. When a merger or
acquisition is conducted, there are various ways the acquiring company can pay for the
assets it will receive. The acquirer can pay cash outright for all the equity shares of the
target company, paying each shareholder a specified amount for each share. Or, it can
provide its own shares to the target company's shareholders according to a specified
conversion ratio (i.e. for each share of the target company owned by a shareholder, the
shareholder will receive X number of shares of the acquiring company). Acquisitions can
be made with a mixture of cash and stock, or with all stock compensation, which is called
a "stock-for-stock" merger. (To learn more, see What does the term "stock-for-stock"
mean?)

When the merger is stock-for-stock, the acquiring company simply proposes to the target
firm a payment of a certain number of its equity shares in exchange for all of the target
company's shares. Provided the target company accepts the offer (which includes a
specified conversion ratio), the acquiring company essentially issues certificates to the
target firm's shareholders, entitling them to trade in their current shares for rights to
acquire a pro rata number of the acquiring firm's shares. The acquiring firm basically
issues new shares (adding to its total number of shares outstanding) to provide shares for
all the target firm's shares that are being converted.

This action, of course, causes the dilution of the current shareholders' equity, since there
are now more total shares outstanding for the same company. However, at the same time,
the acquiring company obtains all of the assets and liabilities of the target firm, thus
approximately neutralizing the effects of the dilution. Should the merger prove beneficial
and provide sufficient synergy, the current shareholders will gain in the long run from the
additional appreciation provided by the assets of the target company.

Terms like "dawn raid", "poison pill", and "shark repellent" might seem like they belong
in James Bond movies, but there's nothing fictional about them - they are part of the
world of mergers and acquisitions (M&A). Owning stock in a company means you are
part owner, and as we see more and more sector-wide consolidation, mergers and
acquisitions are the resultant proceedings. So it is important to know what these terms
mean for your holdings.

Mergers, acquisitions and takeovers have been a part of the business world for centuries.
In today's dynamic economic environment, companies are often faced with decisions
concerning these actions - after all, the job of management is to maximize shareholder
value. Through mergers and acquisitions, a company can (at least in theory) develop a
competitive advantage and ultimately increase shareholder value.

There are several ways that two or more companies can combine their efforts. They can
partner on a project, mutually agree to join forces and merge, or one company can
outright acquire another company, taking over all its operations, including its holdings
and debt, and sometimes replacing management with their own representatives. It’s this
last case of dramatic unfriendly takeovers that is the source of much of M&A’s colorful
vocabulary.

Hostile Takeover
This is an unfriendly takeover attempt by a company or raider that is strongly resisted by
the management and the board of directors of the target firm. These types of takeovers
are usually bad news, affecting employee morale at the targeted firm, which can quickly
turn to animosity against the acquiring firm. Grumblings like, “Did you hear they are
axing a few dozen people in our finance department…” can be heard by the water cooler.
While there are examples of hostile takeovers working, they are generally tougher to pull
off than a friendly merger.

Takeovers are announced practically everyday, but announcing them doesn't necessarily
mean everything will go ahead as planned. In many cases the target company does not
want to be taken over. What does this mean for investors? Everything! There are many
strategies that management can use during M&A activity, and almost all of these
strategies are aimed at affecting the value of the target's stock in some way. Let's take a
look at some more popular ways that companies can protect themselves from a predator.
These are all types of what is referred to as "shark repellent".

Golden Parachute
A golden parachute measure discourages an unwanted takeover by offering lucrative
benefits to the current top executives, who may lose their job if their company is taken
over by another firm. Benefits written into the executives’ contracts include items such as
stock options, bonuses, liberal severance pay and so on. Golden parachutes can be worth
millions of dollars and can cost the acquiring firm a lot of money and therefore act as a
strong deterrent to proceeding with their takeover bid.

Mergers and Acquisitions: Valuation Matters

Investors in a company that are aiming to take over another one must determine whether
the purchase will be beneficial to them. In order to do so, they must ask themselves how
much the company being acquired is really worth.

Naturally, both sides of an M&A deal will have different ideas about the worth of a target
company: its seller will tend to value the company at as high of a price as possible, while
the buyer will try to get the lowest price that he can.
There are, however, many legitimate ways to value companies. The most common
method is to look at comparable companies in an industry, but deal makers employ a
variety of other methods and tools when assessing a target company. Here are just a few
of them:

1. Comparative Ratios - The following are two examples of the many comparative
metrics on which acquiring companies may base their offers:
o Price-Earnings Ratio (P/E Ratio) - With the use of this ratio, an acquiring
company makes an offer that is a multiple of the earnings of the target
company. Looking at the P/E for all the stocks within the same industry
group will give the acquiring company good guidance for what the target's
P/E multiple should be.
o Enterprise-Value-to-Sales Ratio (EV/Sales) - With this ratio, the acquiring
company makes an offer as a multiple of the revenues, again, while being
aware of the price-to-sales ratio of other companies in the industry.
2. Replacement Cost - In a few cases, acquisitions are based on the cost of replacing
the target company. For simplicity's sake, suppose the value of a company is
simply the sum of all its equipment and staffing costs. The acquiring company can
literally order the target to sell at that price, or it will create a competitor for the
same cost. Naturally, it takes a long time to assemble good management, acquire
property and get the right equipment. This method of establishing a price certainly
wouldn't make much sense in a service industry where the key assets - people and
ideas - are hard to value and develop.
3. Discounted Cash Flow (DCF) - A key valuation tool in M&A, discounted cash
flow analysis determines a company's current value according to its estimated
future cash flows. Forecasted free cash flows (net income +
depreciation/amortization - capital expenditures - change in working capital) are
discounted to a present value using the company's weighted average costs of
capital (WACC). Admittedly, DCF is tricky to get right, but few tools can rival
this valuation method.

Synergy: The Premium for Potential Success

For the most part, acquiring companies nearly always pay a substantial premium on the
stock market value of the companies they buy. The justification for doing so nearly
always boils down to the notion of synergy; a merger benefits shareholders when a
company's post-merger share price increases by the value of potential synergy.

Let's face it, it would be highly unlikely for rational owners to sell if they would benefit
more by not selling. That means buyers will need to pay a premium if they hope to
acquire the company, regardless of what pre-merger valuation tells them. For sellers, that
premium represents their company's future prospects. For buyers, the premium represents
part of the post-merger synergy they expect can be achieved. The following equation
offers a good way to think about synergy and how to determine whether a deal makes
sense. The equation solves for the minimum required synergy:
In other words, the success of a merger is measured by whether the value of the buyer is
enhanced by the action. However, the practical constraints of mergers, which we discuss
in part five, often prevent the expected benefits from being fully achieved. Alas, the
synergy promised by deal makers might just fall short.

What to Look For

It's hard for investors to know when a deal is worthwhile. The burden of proof should fall
on the acquiring company. To find mergers that have a chance of success, investors
should start by looking for some of these simple criteria:

• A reasonable purchase price - A premium of, say, 10% above the market price
seems within the bounds of level-headedness. A premium of 50%, on the other
hand, requires synergy of stellar proportions for the deal to make sense. Stay
away from companies that participate in such contests.
• Cash transactions - Companies that pay in cash tend to be more careful when
calculating bids and valuations come closer to target. When stock is used as the
currency for acquisition, discipline can go by the wayside.
• Sensible appetite – An acquiring company should be targeting a company that is
smaller and in businesses that the acquiring company knows intimately. Synergy
is hard to create from companies in disparate business areas. Sadly, companies
have a bad habit of biting off more than they can chew in mergers.

Mergers are awfully hard to get right, so investors should look for acquiring
companies with a healthy grasp of reality.

Mergers and Acquisitions: Doing The Deal

Start with an Offer

When the CEO and top managers of a company decide that they want to do a merger or
acquisition, they start with a tender offer. The process typically begins with the acquiring
company carefully and discreetly buying up shares in the target company, or building a
position. Once the acquiring company starts to purchase shares in the open market, it is
restricted to buying 5% of the total outstanding shares before it must file with the SEC. In
the filing, the company must formally declare how many shares it owns and whether it
intends to buy the company or keep the shares purely as an investment.

Working with financial advisors and investment bankers, the acquiring company will
arrive at an overall price that it's willing to pay for its target in cash, shares or both. The
tender offer is then frequently advertised in the business press, stating the offer price and
the deadline by which the shareholders in the target company must accept (or reject) it.

The Target's Response

Once the tender offer has been made, the target company can do one of several things:
 • Accept the Terms of the Offer - If the target firm's top managers and
shareholders are happy with the terms of the transaction, they will go ahead with
the deal.
• Attempt to Negotiate - The tender offer price may not be high enough for the
target company's shareholders to accept, or the specific terms of the deal may not
be attractive. In a merger, there may be much at stake for the management of the
target - their jobs, in particular. If they're not satisfied with the terms laid out in
the tender offer, the target's management may try to work out more agreeable
terms that let them keep their jobs or, even better, send them off with a nice, big
compensation package.

Not surprisingly, highly sought-after target companies that are the object of
several bidders will have greater latitude for negotiation. Furthermore, managers
have more negotiating power if they can show that they are crucial to the merger's
future success.
• Execute a Poison Pill or Some Other Hostile Takeover Defense – A poison pill
scheme can be triggered by a target company when a hostile suitor acquires a
predetermined percentage of company stock. To execute its defense, the target
company grants all shareholders - except the acquiring company - options to buy
additional stock at a dramatic discount. This dilutes the acquiring company's share
and intercepts its control of the company.
• Find a White Knight - As an alternative, the target company's management may
seek out a friendlier potential acquiring company, or white knight. If a white
knight is found, it will offer an equal or higher price for the shares than the hostile
bidder.

Mergers and acquisitions can face scrutiny from regulatory bodies. For example, if the
two biggest long-distance companies in the U.S., AT&T and Sprint, wanted to merge, the
deal would require approval from the Federal Communications Commission (FCC). The
FCC would probably regard a merger of the two giants as the creation of a monopoly or,
at the very least, a threat to competition in the industry.

Closing the Deal

Finally, once the target company agrees to the tender offer and regulatory requirements
are met, the merger deal will be executed by means of some transaction. In a merger in
which one company buys another, the acquiring company will pay for the target
company's shares with cash, stock or both.

A cash-for-stock transaction is fairly straightforward: target company shareholders

receive a cash payment for each share purchased. This transaction is treated as a taxable
sale of the shares of the target company.

If the transaction is made with stock instead of cash, then it's not taxable. There is simply
an exchange of share certificates. The desire to steer clear of the tax man explains why so
many M&A deals are carried out as stock-for-stock transactions.

When a company is purchased with stock, new shares from the acquiring
company's stock are issued directly to the target company's shareholders, or the new
shares are sent to a broker who manages them for target company shareholders. The
shareholders of the target company are only taxed when they sell their new shares.

When the deal is closed, investors usually receive a new stock in their portfolios - the
acquiring company's expanded stock. Sometimes investors will get new stock identifying
a new corporate entity that is created by the M&A deal.

Mergers and Acquisitions: Break Ups

As mergers capture the imagination of many investors and companies, the idea of getting
smaller might seem counterintuitive. But corporate break-ups, or de-mergers, can be very
attractive options for companies and their shareholders.

Advantages
The rationale behind a spinoff, tracking stock or carve-out is that "the parts are greater
than the whole." These corporate restructuring techniques, which involve the separation
of a business unit or subsidiary from the parent, can help a company raise additional
equity funds. A break-up can also boost a company's valuation by providing powerful
incentives to the people who work in the separating unit, and help the parent's
management to focus on core operations.

Most importantly, shareholders get better information about the business unit because it
issues separate financial statements. This is particularly useful when a company's
traditional line of business differs from the separated business unit. With separate
financial disclosure, investors are better equipped to gauge the value of the parent
corporation. The parent company might attract more investors and, ultimately, more
capital.

Also, separating a subsidiary from its parent can reduce internal competition for
corporate funds. For investors, that's great news: it curbs the kind of negative internal
wrangling that can compromise the unity and productivity of a company.

For employees of the new separate entity, there is a publicly traded stock to motivate and
reward them. Stock options in the parent often provide little incentive to subsidiary
managers, especially because their efforts are buried in the firm's overall performance.

Disadvantages
That said, de-merged firms are likely to be substantially smaller than their parents,
possibly making it harder to tap credit markets and costlier finance that may be affordable
only for larger companies. And the smaller size of the firm may mean it has less
representation on major indexes, making it more difficult to attract interest from
institutional investors.

Meanwhile, there are the extra costs that the parts of the business face if separated. When
a firm divides itself into smaller units, it may be losing the synergy that it had as a larger
entity. For instance, the division of expenses such as marketing, administration and
research and development (R&D) into different business units may cause redundant costs
without increasing overall revenues.
Restructuring Methods
There are several restructuring methods: doing an outright sell-off, doing an equity carve-
out, spinning off a unit to existing shareholders or issuing tracking stock. Each has
advantages and disadvantages for companies and investors. All of these deals are quite
complex.

Sell-Offs
A sell-off, also known as a divestiture, is the outright sale of a company subsidiary.
Normally, sell-offs are done because the subsidiary doesn't fit into the parent company's
core strategy. The market may be undervaluing the combined businesses due to a lack of
synergy between the parent and subsidiary. As a result, management and the board decide
that the subsidiary is better off under different ownership.

Besides getting rid of an unwanted subsidiary, sell-offs also raise cash, which can be used
to pay off debt. In the late 1980s and early 1990s, corporate raiders would use debt to
finance acquisitions. Then, after making a purchase they would sell-off its subsidiaries to
raise cash to service the debt. The raiders' method certainly makes sense if the sum of the
parts is greater than the whole. When it isn't, deals are unsuccessful.

Equity Carve-Outs
More and more companies are using equity carve-outs to boost shareholder value. A
parent firm makes a subsidiary public through an initial public offering (IPO) of shares,
amounting to a partial sell-off. A new publicly-listed company is created, but the parent
keeps a controlling stake in the newly traded subsidiary.

A carve-out is a strategic avenue a parent firm may take when one of its subsidiaries is
growing faster and carrying higher valuations than other businesses owned by the parent.
A carve-out generates cash because shares in the subsidiary are sold to the public, but the
issue also unlocks the value of the subsidiary unit and enhances the parent's shareholder
value.

The new legal entity of a carve-out has a separate board, but in most carve-outs, the
parent retains some control. In these cases, some portion of the parent firm's board of
directors may be shared. Since the parent has a controlling stake, meaning both firms
have common shareholders, the connection between the two will likely be strong.

That said, sometimes companies carve-out a subsidiary not because it's doing well, but
because it is a burden. Such an intention won't lead to a successful result, especially if a
carved-out subsidiary is too loaded with debt, or had trouble even when it was a part of
the parent and is lacking an established track record for growing revenues and profits.

Carve-outs can also create unexpected friction between the parent and subsidiary.
Problems can arise as managers of the carved-out company must be accountable to their
public shareholders as well as the owners of the parent company. This can create divided
loyalties.

Spinoffs
A spinoff occurs when a subsidiary becomes an independent entity. The parent firm
distributes shares of the subsidiary to its shareholders through a stock dividend. Since this
transaction is a dividend distribution, no cash is generated. Thus, spinoffs are unlikely to
be used when a firm needs to finance growth or deals. Like the carve-out, the subsidiary
becomes a separate legal entity with a distinct management and board.

Like carve-outs, spinoffs are usually about separating a healthy operation. In most cases,
spinoffs unlock hidden shareholder value. For the parent company, it sharpens
management focus. For the spinoff company, management doesn't have to compete for
the parent's attention and capital. Once they are set free, managers can explore new
opportunities.

Investors, however, should beware of throw-away subsidiaries the parent created to

separate legal liability or to off-load debt. Once spinoff shares are issued to parent
company shareholders, some shareholders may be tempted to quickly dump these shares
on the market, depressing the share valuation.

Tracking Stock
A tracking stock is a special type of stock issued by a publicly held company to track the
value of one segment of that company. The stock allows the different segments of the
company to be valued differently by investors.

Let's say a slow-growth company trading at a low price-earnings ratio (P/E ratio) happens
to have a fast growing business unit. The company might issue a tracking stock so the
market can value the new business separately from the old one and at a significantly
higher P/E rating.

Why would a firm issue a tracking stock rather than spinning-off or carving-out its fast
growth business for shareholders? The company retains control over the subsidiary; the
two businesses can continue to enjoy synergies and share marketing, administrative
support functions, a headquarters and so on. Finally, and most importantly, if the tracking
stock climbs in value, the parent company can use the tracking stock it owns to make
acquisitions.

Still, shareholders need to remember that tracking stocks are class B, meaning they don't
grant shareholders the same voting rights as those of the main stock. Each share of
tracking stock may have only a half or a quarter of a vote. In rare cases, holders of
tracking stock have no vote at all.

Mergers and Acquisitions: Why They Can Fail

Historical trends show that roughly two thirds of big mergers will disappoint on their own
terms, which means they will lose value on the stock market. The motivations that drive
mergers can be flawed and efficiencies from economies of scale may prove elusive. In
many cases, the problems associated with trying to make merged companies work are all
too concrete.

Flawed Intentions
For starters, a booming stock market encourages mergers, which can spell trouble. Deals
done with highly rated stock as currency are easy and cheap, but the strategic thinking
behind them may be easy and cheap too. Also, mergers are often attempt to imitate:
somebody else has done a big merger, which prompts other top executives to follow suit.

A merger may often have more to do with glory-seeking than business strategy. The
executive ego, which is boosted by buying the competition, is a major force in M&A,
especially when combined with the influences from the bankers, lawyers and other
assorted advisers who can earn big fees from clients engaged in mergers. Most CEOs get
to where they are because they want to be the biggest and the best, and many top
executives get a big bonus for merger deals, no matter what happens to the share price
later.

On the other side of the coin, mergers can be driven by generalized fear. Globalization,
the arrival of new technological developments or a fast-changing economic landscape
that makes the outlook uncertain are all factors that can create a strong incentive for
defensive mergers. Sometimes the management team feels they have no choice and must
acquire a rival before being acquired. The idea is that only big players will survive a
more competitive world.

The Obstacles to Making it Work

Coping with a merger can make top managers spread their time too thinly and neglect
their core business, spelling doom. Too often, potential difficulties seem trivial to
managers caught up in the thrill of the big deal.

The chances for success are further hampered if the corporate cultures of the companies
are very different. When a company is acquired, the decision is typically based on
product or market synergies, but cultural differences are often ignored. It's a mistake to
assume that personnel issues are easily overcome. For example, employees at a target
company might be accustomed to easy access to top management, flexible work
schedules or even a relaxed dress code. These aspects of a working environment may not
seem significant, but if new management removes them, the result can be resentment and
shrinking productivity.

More insight into the failure of mergers is found in the highly acclaimed study from
McKinsey, a global consultancy. The study concludes that companies often focus too
intently on cutting costs following mergers, while revenues, and ultimately, profits,
suffer. Merging companies can focus on integration and cost-cutting so much that they
neglect day-to-day business, thereby prompting nervous customers to flee. This loss of
revenue momentum is one reason so many mergers fail to create value for shareholders.

But remember, not all mergers fail. Size and global reach can be advantageous, and
strong managers can often squeeze greater efficiency out of badly run rivals.
Nevertheless, the promises made by deal makers demand the careful scrutiny of
investors. The success of mergers depends on how realistic the deal makers are and how
well they can integrate two companies while maintaining day-to-day operations.
What Makes An M&A Deal Work?

Companies buy other companies for a variety of reasons. Whatever reasons drive a
particular deal, mergers and acquistions (M&A) are considered successful when multiple
synergies are realized and when the business combination increases the net cash flow of
the merged business beyond what each entity could have achieved on its own. Here we'll
examine what makes a successful acquisition and take a look at three companies that
have pulled it off.

What Does a Company Stand to Gain?

A newly combined company can capture significant revenue growth by utilizing the
following new tools in its shareholder value-creation toolkit:

* Extended customer base to increase sales opportunities.

* Superior product, service, technology and/or brand to better serve customers.
* Expanded geographic footprint that provides greater access with which goods and
services can be sold.
* Diversified product and service offerings that present cross-selling opportunities
(increased share of wallet). (Read New Services Usher In New Clients for more.)
* Added distribution and marketing channels that provide opportunities to gain market
share. (Read Economic Moats Keep Competitors At Bay for more information.)
* More effective sales, research and development (R&D) and new product
development functions. (Read Which Is Better: Dominance Or Innovation? for more
information on R&D.)

Business combinations can also provide cost savings, primarily achieved by eliminating
redundant functions, idle capacity and operational inefficiencies. Ideally, for revenue-
and cost-type benefits to materialize, the target company should easily integrate with the
acquiring entity.

Bharti Airtel
Bharti Airtel Limited (NSE: BHARTIARTL, BSE: 532454), commonly known as airtel,
is an Indian telecommunications company that operates in 19 countries across South
Asia, Africa and the Channel Islands. It operates a GSM network in all countries,
providing 2G or 3G services depending upon the country of operation. Airtel is the fifth
largest telecom operator in the world with over 207.8 million subscribers across 19
countries at the end of 2010. It is the largest cellular service provider in India, with over
152.5 million subscribers at the end of 2010. Airtel is the 3rd largest in-country mobile
operator by subscriber base, behind China Mobile and China Unicom..

Airtel also offers fixed line services and broadband services. It offers its telecom services
under the Airtel brand and is headed by Sunil Bharti Mittal. Bharti Airtel is the first
Indian telecom service provider to achieve this Cisco Gold Certification. To earn Gold
Certification, Bharti Airtel had to meet rigorous standards for networking competency,
service, support and customer satisfaction set forth by Cisco. The company also provides
land-line telephone services and broadband Internet access (DSL) in over 96 cities in
India. It also acts as a carrier for national and international long distance communication
services. The company has a submarine cable landing station at Chennai, which connects
the submarine cable connecting Chennai and Singapore.

It is known for being the first mobile phone company in the world to outsource
everything except marketing and sales and finance. Its network (base stations, microwave
links, etc.) are maintained by Ericsson, Nokia Siemens Network and Huawei. Business
support by IBM and transmission towers by another company (Bharti Infratel Ltd. in
India). Ericsson agreed for the first time, to be paid by the minute for installation and
maintenance of their equipment rather than being paid up front. This enabled the
company to provide pan-India phone call rates of Rs. 1/minute (U$0.02/minute). Call
rates have come down much further. During the last financial year [2009-10], Bharti has
roped in a strategic partner Alcatel-Lucent to manage the network infrastructure for the
Telemedia Business.

History

Sunil Bharti Mittal founded the Bharti Group. In 1983, Sunil Mittal was into an
agreement with Germany's Siemens to manufacture the company's push-button telephone
models for the Indian market. In 1986, Sunil Bharti Mittal incorporated Bharti Telecom
Limited (BTL) and his company became the first in India to offer push-button telephones,
establishing the basis of Bharti Enterprises. This first-mover advantage allowed Sunil
Mittal to expand his manufacturing capacity elsewhere in the telecommunications
market. By the early 1990s, Sunil Mittal had also launched the country's first fax
machines and its first cordless telephones. In 1992, Sunil Mittal won a bid to build a
cellular phone network in Delhi. In 1995, Sunil Mittal incorporated the cellular
operations as Bharti Tele-Ventures and launched service in Delhi. In 1996, cellular
service was extended to Himachal Pradesh. In 1999, Bharti Enterprises acquired control
of JT Holdings, and extended cellular operations to Karnataka and Andhra Pradesh. In
2000, Bharti acquired control of Skycell Communications, in Chennai. In 2001, the
company acquired control of Spice Cell in Calcutta. Bharti Enterprises went public in
2002, and the company was listed on Bombay Stock Exchange and National Stock
Exchange of India. In 2003, the cellular phone operations were rebranded under the
single Airtel brand. In 2004, Bharti acquired control of Hexacom and entered Rajasthan.
In 2005, Bharti extended its network to Andaman and Nicobar.

In 2009, Airtel launched its first international mobile network in Sri Lanka. In 2010,
Airtel began operating in Bangladesh and 16 African countries.

Today, Airtel is the largest cellular service provider in India and fifth largest in the world.

Worldwide Presence
Airtel is the 5th largest mobile operator in the world in terms of subscriber base and has a
commercial presence in 19 countries and the Channel Islands.

Its area of operations includes:

* The Indian Subcontinent:

o Airtel Bangla, in Bangladesh
 o Airtel (India), in India
o Airtel Sri Lanka, in Sri Lanka
* Airtel Africa, which operates in 16 African countries:
o Burkina Faso, Chad, Democratic Republic of the Congo, Republic of the Congo,
Gabon, Ghana, Kenya, Madagascar, Malawi, Niger, Nigeria, Seychelles, Sierra Leone,
Tanzania, Uganda and Zambia.
* The British Crown Dependency islands of Jersey and Guernsey, under the brand
name Airtel-Vodafone, through an agreement with Vodafone.

Bharti Airtel has about 207.8 million subscribers worldwide - 152.5 million in India,
50.3 million are in Africa, 3.2 million in Bangladesh and 1.8 million in Sri Lanka as of
the end of 2010. The numbers include mobile services subscribers in 19 countries and
Indian Telemedia services and Digital services subscribers.

Rebranding

On 18 November 2010, Airtel rebranded itself in India in the first phase of a global
rebranding strategy. The company unveiled a new logo with 'airtel' written in lower case.
Designed by London-based brand agency, Brand Union, the new logo is the letter 'a' in
lowercase, with 'airtel' written in lowercase under the logo.

On November 23, 2010, Airtel's Africa operations were rebranded to 'airtel'. Sri Lanka
followed on November 28, 2010 and on December 20, 2010, Warid Telecom rebranded
to 'airtel' in Bangladesh.

Sponsorship

On May 9, 2009 Airtel signed a major deal with Manchester United Football Club. As a
result of the deal, Airtel gets the rights to broadcast the matches played by the team to its
customers.

Bharti Airtel signed a five-year deal with ESPN Star Sports to become the title sponsor of
the Champions League Twenty20 cricket tournament. The tournament itself is named
"Airtel Champions League Twenty20."

Signature tune

The signature tune of Airtel is composed by Indian musician A. R. Rahman. The tune
became hugely popular and is the world's most downloaded mobile music with over 150
million downloads. A new version of the song was released on 18 November 2010, as
part of the rebranding of the company. This version too was composed by Rahman
himself

Timeline

The chronology of events since Bharti Tele-Ventures was incorporated in 1995:

1995

• Bharti Cellular launched cellular services as "AirTel" in Delhi.

1996

• STET International Netherlands NV, or STET, a company promoted by Telecom

Italia, Italy acquired a 20% equity interest in Bharti Tele-Ventures
• Bharti Telenet launched cellular services in Himachal Pradesh

1997

• British Telecom acquired a 21.05% equity interest in Bharti Cellular

• Bharti Telenet obtained a license for providing fixed-line services in Madhya
Pradesh cirlce (and later Chattisgarh).
• Bharti Telecom and British Telecom formed a 51% : 49% joint venture, Bharti
BT, for providing VSAT services

1998

• Bharti Telecom and British Telecom formed a 51% : 49% joint venture, "Bharti
BT Internet" for providing Internet services
• First Indian private fixed-line services launched in Indore in the Madhya Pradesh
circle on June 4, 1998 by Bharti Telenet thereby ending fixed-line services
monopoly of Department of Telecom (now BSNL).

1999

• Warburg Pincus (through its investment company Brentwood Investment

Holdings Limited) acquired a 19.05% equity interest in Bharti Tele-Ventures
• Bharti Tele-Ventures (by acquiring a 63.45% equity interest in SC Cellular
Holdings) acquired an effective 32.36% equity interest in Bharti Mobile (formerly
JT Mobiles), the cellular services provider in Karnataka and Andhra Pradesh
circles
• New York Life Insurance Fund, or NYLIF, acquired a 3% equity interest in
Bharti Cellular

2000

• Bharti Tele-Ventures acquired an effective equity interest of 40.5% in Bharti

Mobinet (formerly Skycell Communications), the cellular services provider in
Chennai
• Bharti Tele-Ventures acquired a 30.2% equity interest of Telecom Italia in Bharti
Telenet and 18.8% from Bharti Telecom thereby making Bharti Telenet a 100%
subsidiary of Bharti Tele-Ventures
• SingTel (through its investment company Pastel Limited) acquired STET's 15.3%
equity interest in Bharti Tele-Ventures
• Bharti Tele-Ventures acquired an additional effective 41.64% equity interest in
Bharti Mobile (by acquiring the remaining 36.55% equity interest in SC Cellular)
 resulting in Bharti Tele-Ventures holding an effective 74% equity interest in
Bharti Mobile.

2001

• Bharti Tele-Ventures acquired NYLIF's 3% equity interest in Bharti Cellular

• Bharti Telesonic entered into a joint venture, Bharti Aquanet, with SingTel for
establishing a submarine cable landing station at Chennai
• Bharti Tele-Ventures issued additional equity for approximately US$ 481.30
million to SingTel, Warburg Pincus, AIF group, IFC, NYLIF, and Seejay Cellular
and Bharti Telecom
• Bharti Cellular acquired a 100% equity interest in Bharti Mobitel (formerly Spice
Cell ), the cellular services provider in Kolkata
• Bharti Tele-Ventures acquired 85% and 15% in Bharti Telespatial from Bharti
Telecom and Intel, respectively
• Bharti Tele-Ventures acquired a 44% equity interest in Bharti Cellular from
British Telecom, thereby making Bharti Cellular its 100% subsidiary
• Bharti Tele-Ventures acquired an additional 49% equity interest in Bharti
Mobinet from Millicom International and BellSouth International, thereby owning
89.5% equity interest in Bharti Mobinet, which was further increased to 95.3%
following an issuance of additional equity shares by way of rights issue
• Punjab license restored to Bharti Mobile by the Department of Telecom (DoT)
and migration to NTP - 1999 accepted
• Bharti Cellular entered into license agreements to provide cellular services in
eight new circles following the fourth operator cellular license bidding process
• Bharti Telenet entered into license agreements to provide fixed-line services in
the Haryana, Delhi, Tamil Nadu and Karnataka circles
• Bharti Telesonic entered into a license agreement with the DoT to provide
national long distance services across India
• Bharti Aquanet, Bharti Telesonic and Bharti Cellular entered into license
agreements with the DoT to provide ISP services in India
• Bharti Telesonic launched national long distance services under the brand name
of IndiaOne
• Bharti Telenet launched fixed line services in Haryana under the brand name of
"TouchTel".

2002

• Enters into a 5-year agreement with Escotel (now called Idea Cellular) and ETL
of the Escorts group to contract leased line connectivity for its cellular operations
• Mr. Ravi Akhoury ceases to be Director of Bharti Tele
• DoT grants ILD Telephony License to Bharti Telesonic, subsidiary of the
company
• Signs MoU with Telia AB to buy out their 26% stake in Bharti Mobile
• Ties up with Secondary School Certification (SSC) Board, Hyderabad, where
Bharti will announce SSC results to its customers on their mobile phones
• ICICI Bank ties up with Bharti for pre-paid mobile cards via ATMs
• Bharti forays into Mumbai with offers
• Alpine International Ltd. and ELM International Ltd. acquire shares of Bharti
Tele-Ventures
2003

• Airtel breaks interconnectivity with Tata Teleservices in Andhra Pradesh

• Company accorded its approval for amalgamation of its subsidiary companies viz:
Bharti Telenet Ltd, Bharti Telesonic Ltd, Bharti Broadband Networks Ltd and
Bharti Comtel Ltd through scheme of Amalgamation. The merged entity would be
renamed as Bharti Infotel Ltd
• Airtel launches Local direct dialling facility in Chennai circle
• Bharti Cellular unveils "CareTouch" service
• Cellular brand "Airtel" unveils free multimedia messaging services (MMS) for its
customers. The company has also rolled out pan-India GPRS for its corporate
subscribers
• Launches its `IndiaOne MeetXpress' audio-conferencing service
• Punjab, Haryana get free incoming calls from Airtel
• AirTel provides SMS facilities to hearing impaired in Chennai
• Goa, Maharashtra gets 'voice portal' services by Bharti Cellular
• Launches free additional connection to its new subscribers in New Delhi
• Mr Sin Hang Boon and Mr Wong Hung Khim have resigned from the Board of
Directors of Bharti Tele Ventures Ltd with effect from February 27, 2003.
• Airtel launches its GPRS network in Chennai
• Airtel subscribers cross 3 million mark
• AirTel unveils RAD system
• Mr P M Sinha resigns from the Board of Directors of the Company with effect
from March 31, 2003.
• Bharti TeleVentures announces the completion of merger with Bharti Mobitel
• Bharti Mobitel Ltd. merged with Bharti Cellular Ltd.
• "Airtel" and "Touchtel" jointly offer free Touchtel land line for post-paid Airtel
connection
• Airtel rolls out voice mail service for pre-paid customers
• AirTel unveils new scheme for pre-paid customers giving away free talk time
worth Rs 10 crore
• Airtel surpasses 4 lakh subscriber base in Karnataka
• Bharti announces new tariff plan AirTel 012
• Offers 0-1-2, a new cellular package for the customers, which means zero charges
on incoming calls, Re 1 on mobile-to-mobile outgoing calls, Rs 2 on mobile-to-
mobile STD calls
• Rolls out Airtel messenger service
• AirTel offers bundled handset, connection package for Rs 5715
• Airtel slashes SMS rates to 60 paise; excludes Delhi and Mumbai
• Bharti cellular, wholly owned subsidiary of Bharti Tele-Ventures, increases its
stake to 100% in Bharti Mobile
• Signs distribution pact with Hathway Cable. With this alliance, Bharti is said to
be the first telecom firm to step into television distribution services
• Six cell operators move over from Bharti to VSNL
• Airtel augments cellular coverage in Tamil Nadu by including Arcot & Walajapet
in its network
• Airtel ties up with Coke in Chennai to sell its "Magic" prepaid cards
• AirTel embarks on network expansion in Hyderabad
• Airtel unveils IndiaOne Long Distance Calling Card
• AirTel introduces unified tariff package in Tamil Nadu and Chennai
 • Airtel becomes front runner in Karnataka's mobile services market
• Bharti Tele launches 'Always on' service to its subscribers
• State Bank of India and AirTel announce EMI offer at Rs 299
• Bharti and MTV join hands to launch new SIM card
• AirTel unveils new post-paid scheme at zero rental
• AirTel launches `Happy Plan' in AP
• Airtel emerges as the highest selling pre-paid card
• Airtel join hands with Alcatel & Videocon to launch new scheme
• AirTel service provider touches 5 lakh customers in Punjab
• Airtel offers 5 new services for its customers in Mumbai
• Bharti launches first dual band network in Delhi
• Gets 14th place among top 25 Cos in India
• Bharti Mobile crosses 4 lakh mobile subscribers in AP
• Airtel holds top position in terms of dealer penetration
• Prof. V S Raju has been inducted on the Board of Directors of the Company.
• Touchtel launches SMS service in fixed line phones in Karnal and Panipat in
Haryana.
• Airtel unveils special offers in Kerala
• AirTel launches InnoWest for the western region
• Bharti Tele-Ventures enters into an agreement with Telesystem (Mauritius) Pvt.
Ltd
• Airtel slashes out going SMS price to 30ps
• On December 16, 2003, Airtel announced the launch of expense tracker service,
which provides customers the option of tracking their day-to-day expenses on a
daily or monthly basis. This service will allow a user to track expenses, while on
the move by sending an SMS.
• AirTel introduces MTV Club Card in Chennai

2004

• Bharti unveils new card for Mecca piligrims

• AirTel enrolls 50,000 customers in its mobile service in 60 days
• Launches WAP enabled portal Service in Kerala
• Bharti Cellular's AirTel has extended its mobile connectivity to Karaikkal, Nagur,
Mannargudi and Kovilpalayam in Tamil Nadu.
• Airtel customer base touches new high of 5 lakh mark in Andhra Pradesh
• On Pongal, Airtel is launching its first ever MMS downloads in Tamil.
• AirTel tie up with MAA TV
• Airtel launches Rs 50 pre-paids recharge
• AirTel launched a family pack for its post-paid customers in Chennai on January
29.
• Bharti Tele-Ventures enters into a three year service agreement with Ericsson
• Bharti Tele-Ventures (BTVL) has signed and received unified access service
licence to provide GSM services in Uttar Pradesh (East), West Bengal &
Andaman Nicobar, Orissa, Bihar and Jammu & Kashmir. The licence has been
granted to Bharti Cellular Ltd (BCL), the cellular arm and subsidiary of BTVL.
• Airtel and Mobilink, the only GSM cellular service provider in Pakistan, sign the
first-ever bilateral roaming agreement between India and Pakistan
• Acquires switching systems from Tekelec
• Bharti Tele-Ventures Ltd signed an information technology outsourcing deal with
infotech major IBM, estimated to be in the range of 0-750 million for a ten-year
period.
• Jayant Khosla, new chief executive officer, Mumbai
• Signs MoU to join the South East Asia - Middle East - Western Europe 4 (SEA-
ME-WE-4) consortium along with 15 other global telecom operators.
• Bharti Tele-Ventures has struck a deal with Shyam Telecom to buy out the latter's
67.5 per cent stake in cellular services company Hexacom for Rs 430 crore.
• Samsung India Electronics Limited has tied up with cellular operator Bharti for
bundling its mobile handsets with a connection.
• The Bharti group finalised a Rs 500-crore deal to share its national long-distance
(STD) network with VSNL in a first-of-its-kind accord between two top telecom
service providers in a bid to optimise capacities in the NLD segment.
• Internet gateway and services provider, Videsh Sanchar Nigam Ltd. (VSNL) has
signed a Right to Use (RoU) agreement to deploy mobile telephony major, Bharti
Tele-Ventures' existing National Long Distance (NLD) backbone.
• Airtel offers talktime transfer service
• Airtel has announced money-back guarantee offer in case of call drop or poor
network experience for its subscribers
• Bharti launches 2-in-1 card
• Airtel launched two-way international roaming and GPRS for prepaid customers
in the Maharshtra and Goa circles
• Bharti Tele-Ventures has bagged the Asian MobileNews operator of the year
award in India and the subcontinent
• Bharti Tele-Ventures Ltd has awarded a million equipment contract to Swedish
telecoms company Ericsson
• Bharti Televentures announced formation of a new strategic business unit to offer
various telecom and IT services through a single contact
• Bharti Televentures unveiled a mobile portal featuring sports, entertainment and
news among others
• Airtel ties up with Micro Tech to set up 'Mcops' vehicle security system
• Bharti Tele-Venture on July 19 launched "Caller Tunes" service, a personalized
mobile music service where the caller hears songs and other sound clips instead of
the traditional switchboard ring-ring tone
• Airtel, a private telecom services provider, has commissioned its first 24x7
customer service centre in Andhra Pradesh
• Airtel unveils Rs 199 pre paid card
• AirTel join hands with Narsee Monjee Institute of Management Studies (NMIMS)
to offer executive MBA programme
• AirTel introduces new scheme for hearing impaired in Maharashtra & Goa
• AirTel inks pact with JP Mobile
• Rolls out Enhanced Data Rate for Global Evolution (EDGE) network in Pune on
September 9, 2004, Ties up with Nokia for sale of Nokia 6230, an EDGE-enabled
handset.
• AirTel unveils first virtual calling cards in India
• BTVL rolls out EDGE services in Bangalore
• Airtel rolls out Full Talktime Advantage card
• Airtel rolls out wi-fi services in Mumbai
• BTVL launches new 'Airtel Broadband Friendly Offer'
• Airtel launches GPRS services for pre-paid customers
 • Airtel partners with ITPO to set up Wi-Fi network in Delhi
• Airtel launches EDGE services and a new pre-paid plan for Chennai
• Airtel introduces LAS in Karnataka

2005

• Airtel launches video services for its GPRS customers on February 22, 2005
• Airtel unveils new TV ad featuring Sachin Tendulkar and Shah Rukh Khan
• Bharti Tele-Ventures launches telecom network in Andaman & Nicobar
• BTVL unveil fixed line, broadband services
• Bharti inks 5-m deal with Nokia for rural network expansion
• Bharti Tele Ventures Ltd has announced that Airtel, ICICI Bank & VISA have
joined hands to launch mCheq - a revolutionary new service - a credit card on the
mobile phone
• Airtel introduces BlackBerry Connect in India
• Bharti Tele Ventures announces agreement with Vodafone
• Airtel unveils 'free flight' offer
• Bharti Tele-Ventures launches under sea cable system

2006

• Airtel unveils Re 1 STD plans

• Airtel launches NetXpert.
• Airtel launches Post2Pre recharging service on April 04,2006.
• Airtel sets up customer centre
• Airtel announced the launch of `Save My Phone Contact' service for its pre-paid
and post-paid customers in Delhi
• Bharti Tele Ventures bags 'Wireless Service Provider of the Year' & 'Competitive
Service Provider of the Year' awards
• Cellebrum join hands with Airtel
• Airtel Mega unveiled in Coimbatore
• Bharti Airtel Ltd and Microsoft announced a strategic partnership that will offer a
range of software and services for small and medium businesses (SMBs) in India.
• Bharti Airtel Ltd on Nov 8, announced a first-of-its-kind alliance with the Adani
Group for establishing an end-to-end modern telecommunication network
infrastructure for the latter's multi-sector special economic zone (SEZ), located
near Mundra Port in Kutch district of Gujarat.

2007

• Bharti Airtel has come out with a slew of initiatives including buying out
SingTel's 50 per cent stake in joint venture under sea cable company Network i2i
• Bharti Airtel on Feb 11, has been awarded QCI-DL Shah National Award on
Economics of Quality.
• Bharti Airtel Ltd has announces changes in the operational leadership structure
and roles in the Company effective April 01, 2007.
• Bharti Airtel Ltd on April 01, 2007, has announces the reduction in ISD Tariffs
for all its mobile customers in India.

8Airtel signs agreement with HTC for touch screen mobile.

2008

• Nokia Siemens Networks on Jan 3 declared that it has been awarded a multi
million euro contract from Bharti Airtel Ltd for deployment of a single interactive
voice response (IVR) platform across 23 circles. The three-year turnkey contract
comprises designing, planning, systems integration and optimisation services to
raise overall customer experience. The new IVR solution will enable Airtel to
deliver services such as voice SMS, televoting, call management services, caller
ring back tone and voice portal on a faster time-to-market basis and, therefore,
reduce OPEX costs.
• Bharti Airtel Ltd on February 13, 2008 has announced that it has achieved the 60
million mobile, fixed line and broadband customers.
• Bharti Airtel tied up with US-based Apple Inc to bring the popular GSM-based
iPhone in the country.
• Bharti Airtel Ltd has forged a technology alliance with Infosys Technologies Ltd
to launch its Direct-to-Home (DTH) television services. Infosys, through its
digital convergence platform, will offer a suite of products including devices,
application servers and interactive applications for Airtel's DTH services.

2009

• Bharti Airtel signed a five-year managed services deal with Alcatel-Lucent for its
fixed-line and broadband operations.
• Bharti Airtel launched the 'Airtel Advantage' initiative. The initiative is aimed at
offering the added advantage to Airtel customers to be in touch with each other at
an affordable rate of 50 paise per minute, be it a national long distance call (STD)
or a local call.
• In order to create products and services for the small, medium and large
enterprises, Bharti Airtel and Cisco announced a strategic business alliance. The
alliance would combine the strengths of Airtel's network service and Cisco'
Internet Protocol (IP) technologies.
• Airtel and mChek announce milestone of 1 Million users and introduce a broad
range of new mCommerce services.

2010

• On 14, February 2010, Zain Ghana issued a resolution to accept a $10.7 billion
buyout offer from Bharti Airtel Limited (Bharti) to enter into exclusive
discussions until 25 March 2010, regarding the sale of its African unit, Zain
Africa BV.
• Bharti Airtel submitted its bid for 3G spectrum auction which starts from April 9,
2010.
• Bharti Airtel has partnered with US-based software maker VMware Inc. It has
done this in order to focus on the cloud-based managed computer services market.
• On May 18, 2010, Airtel won 3G spectrum in 13 circles: Delhi, Mumbai, Andhra
Pradesh, Karnataka, Tamil Nadu, Uttar Pradesh (West), Rajasthan, West Bengal,
Himachal Pradesh, Bihar, Assam, North East, Jammu & Kashmir for Rs. 12,295
crores.
• Bharti Airtel wins broadband spectrum in four circles: Maharashtra, Karnataka,
Punjab and Kolkata for Rs. 3314.36 crores.
 • On 8, June 2010, Bharti Airtel completed a deal to Zain Telecom's businesses in
15 African countries for $10.7 billion.
• On August 11, 2010, Bharti Airtel announced that it would acquire 100% stake in
Telecom Seychelles for US$62 million taking its global presence to 19 countries.
• On 20 September 2010, Bharti Airtel said that it has given contracts to Ericsson
India, Nokia Siemens Networks (NSN) and Huawei Technologies to set up
infrastructure for providing 3G services in the country.
• On 18 November, 2010, Bharti Airtel announced a re-branding campaign
wherein, they would be referred as airtel, with a new logo.
• On 20 December 2010, Airtel launched its new identity for Bangladesh
subscribers.
• On 23 December 2010, Airtel opened its first underground terrestrial fibre optic
cable built in alliance with China Telecom.

2011

• On 23 February 2011, Bharti Airtel launched the Europe-India gateway cable

system, along with 16 other global telecom firms. A 15,000 kilometre long cable,
between Mumbai and London.
• On 27 February 2011, Bharti Airtel launched its speech recognition based service,
'One Number, One Voice'.

Awards and Recognitions

Airtel has won the ‘Most Preferred Cellular Service Provider Brand’ award at the
CNBC Awaaz Consumer Awards in Mumbai. This is 6th year in a row that airtel has won
the award in this category. This year, the awards were based on an exhaustive consumer
survey done by The Nielsen Company. Over 3,000 consumers, spanning 19 cities and 16
states in India, rated brands across different categories to choose brands which delivered
true value of money

Bharti airtel has received the prestigious Businessworld-FICCI-SEDF Corporate

Social Responsibility Award 2009-2010. The FICCI Socio Economic Development
Foundation (FICCI-SEDF) and Businessworld CSR award was instituted in 1999 to
recognize exemplary responsible business practices by the Indian industry.

Core Values
Customer Focus
Respect and Care for Individuals
Meeting Commitments
Integrity
Continuous Improvement

Our Differentiators
Centum Learning enjoys sustainable competitive advantages emanating from a powerful vision and an empowered work culture where every individual is
committed to excellence in crafting learning solutions. Few key pillars distinguish us from the rest.
 A Bharti Associate Company and a strategic partner to all Bharti Group companies for transforming business outcomes

Provides business focused end-to-end learning and skill building solutions

Strategic partner to leading corporates including several Fortune 500 companies for transforming business outcomes

Over 800 Centum Learning certified Learning and Development Specialists across 19 countries

Enhanced competencies of more than 1, 40,000 employees within the Bharti group itself

Formed Centum Workskills India Limited in association with NSDC to develop globally deployable skilled manpower, empowering millions
of unskilled youth and creating employability

Launched Centum U – Institute of Management and Creative Studies for offering industry oriented degrees in association with world
renowned Universities and Institutes

Enhancing employability quotient of students through 150 Centum Learning Centres in 90 locations by offering higher education
programmes in collaboration with leading universities like University of Delhi and Indira Gandhi National Open University (IGNOU)

Bharti set to acquire Zain Africa BV

New Delhi , March 30, 2010 : Bharti Airtel Limited (“Bharti”), Asia’s leading
telecommunications service provider, today announced that it has entered into a legally
binding definitive agreement with Zain Group (“Zain”) to acquire Zain Africa BV based
on an enterprise valuation of USD 10.7 billion.

Under the agreement, Bharti will acquire Zain’s African mobile services operations in 15
countries with a total customer base of over 42 million. Zain is the market leader in ten of
these countries and ranks second in four countries. With this acquisition, Bharti Airtel
will be the world’s fifth largest wireless company with operations across 18 countries.
Bharti group’s global telecom footprint will expand to 21 countries along with the
operations in Seychelles, Jersey, and Guernsey. The company’s network will now cover
over 1.8 billion people - the second largest population coverage among Telcos globally.

Mr. Sunil Bharti Mittal, Chairman and Managing Director, Bharti Airtel said, “This
agreement is a landmark for global telecom industry and game changer for Bharti. More
importantly, this transaction is a pioneering step towards South South cooperation and
strengthening of ties between India and Africa. With this acquisition, Bharti Airtel will be
transformed into a truly global telecom company with operations across 18 countries
fulfilling our vision of building a world-class multinational.

We are excited at the growth opportunities in Africa, the continent of hope and
opportunity. We believe that the strength of our brand and the historical Indian connect
with Africa coupled with our unique business model will allow us to unlock the potential
of these emerging markets. We are committed to partnering with the governments in
these countries in taking affordable telecom services to the remotest geographies and
bridging the digital divide. I would also like to compliment the Zain group for building
world-class operations in Africa and we have enjoyed working with them on this
transaction.”

Mr Mittal further added, "The extremely tight time lines and the enormity of the task
posed a real challenge. Bharti was able to achieve this important milestone through much
hardwork and support from SingTel and the external advisors. Appreciation is in order
for all the team members involved in this transaction."

Mr. Asaad Al Banwan, Chairman, Zain Group said, “Since we acquired Celtel in 2005,
we have grown substantially to become one of Africa’s leading mobile operators, and we
are proud of the contribution Zain Africa has made to the development of
telecommunications across the continent."

He added, “Bharti Airtel has a fantastic track record in running successful operations in
the emerging markets and we are delighted that the African telecom asset that we so
assiduously built is becoming part of such a committed and reputable telecom
powerhouse. We wish Bharti Airtel all the very best for their future success in Africa.”

Zain Africa BV has mobile operations in the following 15 countries - Burkina Faso,
Chad, Congo Brazzaville, Democratic Republic of Congo, Gabon, Ghana, Kenya,
Madagascar, Malawi, Niger, Nigeria, Sierra Leone, Tanzania, Uganda, and Zambia. The
total population of these 15 countries stands at over 450 million with telecom penetration
of approximately 32%.

With this acquisition Bharti’s total customer base will increase to around 179 million in
18 countries. Bharti launched mobile services in India in 1995, Sri Lanka in 2009 and
acquired Warid in Bangladesh in January 2010.

Standard Chartered Bank is the Lead Advisor to Bharti on this transaction. Barclays
Capital is the Joint Lead Advisor and SBI Group is the Lead Onshore Advisor. Global
Investment House KSCC is the Regional Advisor to Bharti on this transaction.

ZAIN AFRICA

Introduction: Ahead & Growing

Zain is the pioneer of mobile telecommunications in the Middle East.

We began life in 1983 in Kuwait as the region’s first mobile operator, and since the
initiation of our expansion strategy in 2003, we have expanded rapidly.

Today, we are a leading mobile and data services operator with a commercial
footprint in 7 Middle Eastern and African countries with a workforce of 6,000 providing
a comprehensive range of mobile voice and data services to over 37.24 million** active
individual and business customers (December 31, 2010).

On September 8, 2007 MTC Group announced it has re-branded to Zain

(www.zain.com) which becomes the Group’s corporate master brand with immediate
effect.
In the Middle East we operate in Bahrain, Jordan, Kuwait, Iraq ,Saudi Arabia and
Sudan as Zain, and in Lebanon as mtc touch (under a management contract).

On March 14, 2009, Zain in a 50/50 partnership with Al Ajial Investment Fund
Holding acquired 31% of Wana, the third mobile telecom operator in Morocco.

On June 8, 2010, Zain announced that it has now satisfied all required conditions
precedent to closing of the sale of 100% of Zain Africa BV (“Zain Africa”) to Bharti
Airtel Limited (“Bharti”) for US$10.7 billion on an enterprise basis. The 15 countries that
Bharti Airtel acquired from Zain in Africa, were- Burkina Faso, Chad, Democratic
Republic of the Congo, Republic of the Congo, Gabon, Ghana, Kenya, Madagascar,
Malawi, Niger, Nigeria, Sierra Leone, Tanzania, Uganda and Zambia.

Listed on the Kuwait Stock Exchange, there are no restrictions on Zain shares as the
company’s capital is 100% free float and publicly traded. The largest shareholder is the
Kuwait Investment Authority (24.6%).

In addition to securing the best possible returns for shareholders consistent with a high
standard of corporate governance, Zain considers itself defined by a commitment to
excellence in providing world-class mobile / data services and an ethos of corporate
social responsibility in supporting communities, offering employment and creating
business opportunities wherever it operates.

It is important to Zain that its economic, social and cultural projects have a positive
impact on the people of all the countries in which we operate.

Brand

Zain, formerly MTC, was the first mobile telecommunications company in the Middle
East when it started its operations in Kuwait back in 1983. At the end of 2002, the
company launched its expansion vision, aggressively targeting to achieve a global
position in just 9 years – whereas it had taken several decades for global companies to
achieve this status. From being in one country in 2002, Zain grew to a conglomerate with
commercial operations in 23 countries by third quarter of 2009, making it the world’s 3rd
largest telecom company in terms of geographic footprint.

This expansion was partially achieved through the acquisition of several existing
telecommunications companies in the region - MTC-Vodafone in Kuwait and Bahrain to
Fastlink in Jordan, Mobitel in Sudan, MTC Atheer and Iraqna in Iraq, and Celtel in
Africa - each strongly branded in its own right. Thus, as a fast growing mobile operator
servicing its clients under 7 different brand names have become local icons in their own
right, the company felt the need to group under a single brand that will facilitate its rise
on the global arena.

Name:

A long journey, covering several steps in brand name creation and giving voice to the
company’s own employees, ended up with the selection of Zain as the new brand name.
Zain is simple, memorable and easy to pronounce across the global marketplace. The
name Zain tested extremely well among cross-sections of the potential global audience.
These research results coincided with our internal selection. Zain has the added benefit of
being rich in positive connotations in several languages. For example, in Arabic, Zain
means ‘beautiful, good and wonderful”, in Latin it means ‘dark horse’ (of good breed;
meaning cheval de race). In fact, the name Zain reflects our values and our positioning.
As a company, our vision is to create a successful business model that will go outward
from the Middle East to the rest of the world. Having a name that embodies beauty and
optimism is a move we’re proud of.”

Values:

With the need for a new brand name came the need to consolidate the company values
into a single set shared by all employees. These values are core to the new brand identity.
At the heart of Zain stand 3 core values that constitute the foundations of this brand:

Heart: Live your life with courage and resolve, engage your spirit, touch your emotions,
connect to your soul.

Radiance: Leading the way with imagination and vision, bringing joy, color, and richness
to your life.

Belonging: Bringing fellowship and community to all, transcending cultural and

geographical boundaries.

Signature:

The Zain brand and its new theme – A wonderful world - capture the energy, inspiration
and diversity of the Group’s customers, employees and other stakeholders. The new
signature logo and its colorful identity reflect the Group’s freshness, boldness and
vitality. It is a perfect expression of the Zain brand and is inspired from a sense of aura –
a distinctive but intangible atmosphere that surrounds a person giving them an air of
mystery – something important to human life echoing growth, progression and diversity.
Besides its distinctive shape, the strength of the Zain logo lies in the fact that it is as
recognizable and liked when used in its fragmented form.

On the technical side, we were bold in choosing colors that were not the usual set of
primary and secondary colors used in most telecoms logos (ie: Red, blue, yellow, green,
etc…). Color is inspirational and evocative. Used effectively, it can create an emotional
language that reflects our character and engages a global audience. Black expresses a
sophisticated and contemporary approach; Purple represents our energy and warmth
while Aqua brings freshness and a cool assurance to the mix. These colors are enhanced
by a set of lively secondary colors that add zest to Zain’s visual signature.

Rebranding:
To launch this new brand, Zain developed a campaign promoting a wonderful world in
which people observe not what they see, but what they look for...

7 Middle Eastern operations were rebranded to Zain throughout 2007 with a series of
first-rate events. 14 African operations followed suit on August 1, 2008 where they
rebranded from Celtel to Zain, an occasion that was celebrated with a series of
spectacular events, attended by over 100,000 people. The rebranding concerts were
attended by some of Africa’s senior diplomats, VIPs, artists and celebrities in all 14
countries who witnessed live speeches and festivities through an hour long live satellite
feed that linked all countries to each other, the most ambitious live satellite linkup the
continent has ever seen. It was the biggest and most successful rebranding Africa has
ever seen, which earned Zain the Best Marketing Campaign of the Year on November
23rd, 2008 at the inaugural AfricaCom Awards in Cape Town, South Africa.

Today, only two years old, Zain has one of the most recognizable and strongest brand
presences, supported by strong promotion and sponsorship programs, across each of the
group’s key markets. According to the 2009 BRANDFINANCE GLOBAL 500, and
independent brand valuation report, Zain’s brand value was estimated at around US$ 2
billion. Additionally, Zain is ranked 28 amongst the top 5 global telecoms operators’
brands according to the Brand Report published by Total Telecom in 2009.

Our Values: Powered by People

At the forefront of any successful company has to be its own people – at the forefront of
planning, execution and management. In alignment with our “3x3x3” expansion strategy,
our team’s mission is to cement Zain as a leading global mobile operator providing
world-class services to all our customers. This means enchanting our customers and
exceeding their expectations.

We have come a very long way in a very short time from our modest but visionary
beginnings and we believe that any organisation aspiring to such a goal must be built on
strong internal foundations and practices.

At Zain, we pride ourselves on our foundations, on our employees and in the way we
operate, which is in line with the objectives of our corporate strategy and which revolve
around:

Our values
As Zain we become one international family, building on the outstanding progress we
have made over the past five years, and adopting core values that remain constant
irrespective of the different national cultures and identities that we share.

These values are: Radiance, Heart and Belonging.

Radiance is about leading the way with imagination and vision, bringing joy, colour, and
richness to our business environment.
Heart represents living our lives with courage and resolve, engaging our spirit and
touching emotions.

Belonging means exactly what it says… being part of the fellowship and community
spirit that knows no territorial boundaries.

Such values are not new to us. I believe we all respect and practice them, and that they
have been integral to our success to date. The difference now is that we have formally
adopted them as business drivers – qualities that we share with our colleagues and
customers, people who are progressive achievers and are dedicated to realising their
goals.

We have worked hard to build these foundations and we are confident our personnel are
inspired by our corporate values, ethics and sense of mission and that this is reflected in
their relations with our customers and shareholders. Quite simply, at Zain we believe that
values, ambition, customer satisfaction and mission accomplishment are inseparable.

Pre merger

Bharti Airtel dials Zain

Eager on increasing its footprint globally, India’s leading mobile company Bharti
Airtel has made an offer worth $10.7 billion to acquire the African operations of Kuwait-
based Zain.

Bharti Airtel and Zain have agreed to enter into exclusive discussions until March 25
for the acquisition of Zain’s African unit (Zain Africa BV) based on an enterprise value
of $10.7 billion. This potential transaction does not include Zain’s operations in Morocco
and Sudan.

The deal remains subject to due diligence, customary regulatory approvals and
signing of final transaction documentation. There can be no assurance that a transaction
will be consummated. Zain’s board had already given the go-ahead to Bharti Airtel’s bid.
Zain is a leading mobile and data services operator in the Middle East and Africa with
presence in 23 nations and a customer base of over seven-crore. In Africa, it has
operations in 17 countries with over 4.2-crore subscribers.

“We all believe that we would be welcomed in that continent (Africa). I am sure we
will go and speak to the regulator and hopefully get the requisite permissions,” Bharti
Enterprises Managing Director Rajan Mittal told journalists here.

During the exclusive agreement, Bharti would assess the financial parameters and
other related issues, including regulatory norms that are needed to be in place for the
deal.

If the deal goes through, Bharti will be among the top ten operators globally. In
India, Bharti Airtel has over 12.5-crore subscribers.

This development follows Bharti Airtel’s recent acquisition of Bangladesh’s Warid

Telecom.
Bharti Airtel readying funds for Zain deal

Bharti Airtel said in a statement. Bharti Airtel has asked its bankers to be ready for
the funds transfer as and when the acquisition takes place.

Ties up with banks

In March, Bharti Airtel had tied up $8.3 billion from State Bank of India and some
foreign banks to fund the acquisition of Zain telecom's African assets.

On completion, Bharti would be required to pay another $700 million to Zain after a
year, while taking a load of $1.7 billion debt associated with the African assets, the
release added.

Statement on the sale of Zain Africa BV to Bharti Airtel Limited

Further to the announcement made by Mobile Telecommunications Company KSC,
‘Zain’, on February 16, 2010, regarding the sale of its African unit, ‘Zain Africa BV’ to
Bharti Airtel Limited, the company confirms that the Board of Directors of Zain met in
Kuwait on Wednesday 24 March 2010, to review the latest developments and
negotiations related to this matter.

The Board is pleased to report that the due diligence process has been completed. Both
Zain and Bharti are now working towards finalizing the definitive agreements which will
address all key terms and findings arising out of the due diligence.

Definitive agreements are expected to be signed soon. Upon signing, the parties will
move towards obtaining any required approvals.

It has been reported that Bharti has already secured the entire financing requirement of
USD 8.3 billion for this transaction.

The sale of ‘Zain Africa BV’ does not include Zain’s operation in Sudan or its investment
in Morocco.

Issued by Zain Group Corporate Communications Department

POST

Govt lost $308 mn in Zain sale (Tanzania)

The Public Corporations Accounts Committee (POAC) has stated that the Tanzanian
government has lost $308 million by selling Zain Tanzania to the India-based company
Bharti Airtel last year.

The Tanzania Revenue Authority Commissioner General, Harry Kitillya stated that the
government lost the revenue because assets in Tanzania were not sold since its owner did
not change.
As per Kitillya, the process of selling the company was done in Netherlands, explaining
that it was not easy for them to collect revenue from the country they can not reach. He
told the committee that what was sold was Zain Africa BV and not Zain Tanzania.

According to the committee Chairman, Kigoma North Member of Parliament for

Chadema, Zitto Kabwe, the amount lost is equivalent to 30% of government’s capital
which it deserved to gain after the sale of 4 million subscribers at US$252 each.

The government owns 40% of shares of the company while Bharti Airtel holds 60%.

Kabwe added that this amount has been lost due to bad financial structure. They want the
government to explain the committee about the whereabouts of the amount. They would
have used the funds to construct schools, hospitals and improve social services. The
Income Tax Act of 2004 has some weaknesses which provided loopholes for diversion of
funds.

The committee directed the ministry of Finance and Economic Affairs to bring an
investigation report on the matter within a month with proposals to change or improve the
laws.

The ministry should also establish the amount of income tax that was supposed to be
collected from the new company as well as ensure there is transparency in handling of
shares owned by the government in different companies.

Bharti-Zain deal finally sealed

In the largest ever telecom takeover by an Indian firm, Bharti Airtel on Tuesday signed a
deal with Kuwait-based Zain Telecom to buy its African business for $10.7 billion (about
Rs. 48,000 crore).

Announcing the deal, Sunil Mittal said, "This agreement is a landmark for global telecom
industry and game changer for Bharti.

"This transaction is a pioneering step towards South-South cooperation and strengthening

of ties between India and Africa. With this acquisition, Bharti Airtel will be transformed
into a truly global telecom company with operations across 18 countries fulfilling our
vision of building a world-class multinational,” said Mittal.

“We are excited at the growth opportunities in Africa, the continent of hope and
opportunity. We believe that the strength of our brand and the historical Indian connect
with Africa coupled with our unique business model will allow us to unlock the potential
of these emerging markets. We are committed to partnering with the governments in
these countries in taking affordable telecom services to the remotest geographies and
bridging the digital divide. I would also like to compliment the Zain group for building
world-class operations in Africa and we have enjoyed working with them on this
transaction," he said.

"The extremely tight time lines and the enormity of the task posed a real challenge.
Bharti was able to achieve this important milestone through much hardwork and support
from SingTel and the external advisors. Appreciation is in order for all the team members
involved in this transaction," he further added.

Asaad Al Banwan, Chairman, Zain Group said, "Since we acquired Celtel in 2005, we
have grown substantially to become one of Africa's leading mobile operators, and we are
proud of the contribution Zain Africa has made to the development of
telecommunications across the continent."

The acquisition, the second largest by an Indian entity after Tatas' Corus deal, would
make Sunil Mittal-led Bharti the world's seventh largest mobile operator with a total
subscriber base of about 179 million. It would have estimated revenues of $13 billion.

With this, Bharti has fulfilled its ambition of entering Africa, where it failed twice in the
last two year's to forge a $23 billion merger deal with South African telecom giant MTN.

Zain has operations in 17 African countries and Bharti has acquired all, but those in
Sudan and Morocco.

The African business would widen Bharti's reach, which was hitherto restricted to Asia
and Indian Ocean region with businesses in Sri Lanka, Bangladesh and Seychelles.

Of the $10.7 billion enterprise value of Zain, Bharti will be paying $8.3 billion upfront
and $700 million after a year. It would also take over approximately $1.7 billion of Zain's
debts as on December 31, 2009.

Of the $8.3 billion paid to Zain, Bharti has raised the debt from a consortium of foreign
banks and State Bank of India with the lead-arranger and lead-advisor Standard Chartered
Bank committing the highest amount -- $1.3 billion followed by $0.9 billion by Barclays.

The rest of the co-advisors -- ANZ, BNP, Bank of America-Merrill Lynch, Credit
Agricole CIB, DBS, HSBC, Bank of Tokyo-Mitsubishi UFJ and Sumitomo Mitsui
Banking Corporation -- have allocated $600 million each.

State Bank of India has agreed up to one billion dollar loan in rupee terms.

Bharti-Zain deal a move in right direction: Khurshid

Corporate Affairs Minister Salman Khurshid described the $10.7-billion telecom deal
between Bharti and Zain Telecom as "a move in the right direction" and hoped more
Indian companies would follow suit.

"A good move in the right direction. They (Bharti Airtel) have set an example to follow. I
hope that more companies will make acquisitions abroad", the Minister said while
commenting on mega deal.

The government, Khurshid said, has been supportive of such ventures of the Indian
companies.

In one of the biggest deals in the telecom sector, Sunil-Mittal led Bharti Airtel today
acquired the African assets of Zain to become the fifth biggest wireless company in the
world.
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