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ABSTRACT: The main objective of this work was to catalogue and bring to the fore, the various driving forces or motives that push leaders of Telecom companies to enter into mergers and acquisitions. The aim was to do a comprehensive review of literature on motives for mergers and acquisitions in the Telecommunications industry, to help researchers in this particular area, and also managers of Telecommunications companies, to understand better the dynamics of mergers and acquisitions worldwide. The work was purely a review of literature on motives for mergers and acquisitions. After a comprehensive review, the motives which stood out were Synergy, Growth, Improving market standing, creating wealth for shareholders, and Empire building for managers, in that order.
KEYWORDS: motives, telecommunications, merger, acquisition, synergy, growth.
1 Background
Globally, mergers and acquisitions have taken a high lead in corporate strategy due to its perceived benefits. A merger is said to have occurred when two companies (usually corporations) combine to form a new company (http://www.wisegeek.com/what-is-a-merger.htm). It can be horizontal, vertical, or conglomerate.
Mergers and acquisitions in the Telecommunications Sector are mostly horizontal mergers simply because the entities involved operate in the same industry, that is the telecommunications industry, and also on the same product lines. Lately, vertical mergers are beginning to be popular, with Telecommunication vendors merging with Telecommunication operators, especially at the operational level. With acquisition, one company purchases another, generally by buying most of its stock. Ghana Telecom and Vodafone's deal for instance is purely an acquisition by Vodafone. The acquired company may become a subsidiary of the buyer. Over the last few years, a phenomenal growth has been witnessed in the number of mergers and acquisitions taking place in the telecommunications industry. The reasons behind this development include the following:
* Deregulation
* Introduction of sophisticated technologies (Wireless land phone services)
* Innovative products and services (Internet, broadband and cable services)
In countries like India, mergers and acquisitions have increased to a considerable level from the mid-1990s. In the United States, the mergers and acquisitions in the telecommunications sector are going on in a full-fledged manner.
Following are the important mergers and acquisitions that took place in the telecommunications sector as reported by EconomyWatch in 2010 (http://www.economywatch.com/mergers-acquisitions/international/telecom-sector.html):
* The takeover of Mobilink Telecom by...