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Friday, June 7, 2013

Softbank shows the way in quantifying telecom M&A synergies

As a follower of the TMTE sector firms, I happened to browse through the Japanese telco Softbank offering presentation for its 70% acquisition for the USA wireless telecom operator Sprint. It had interesting facts on the USA market like AT&T/Verizon duopoly wrt subscribers and EBITDA(67% subscribers and 82% EBITDA), low mobile data speeds of 1Mbps vs markets like UK/Australia, high postpaid base etc. The comparison of USA/UK/Japan with BRIC was an eye opener. Read the entire presentation at http://www.sec.gov/Archives/edgar/data/101830/000119312513228092/d541834d425.htm

However, what really caught my attention were these two graphs breaking down estimated deal synergies. Many talk about synergies but few walk the talk while publicly stating it.

What is really stunning is the estimated opex synergies of $2bn from 2014-2017, and then $3bn beyond. of this, they estimate nearly 40% from device procurement-really I would not have thought devices margins are so high.Another 49% rests from their knowledge transfer on network opex, churn and customer care-all performance drivers of telecom. IT is probably non incremental since vendors are quite efficient there unlike for other components.

For capex, purchasing synergies again constitute 42% of estimated synergies, while knowledge management of traffic and core building would give another 42%.

Here, they have built on their core strengths of networks and smart management while deriving the synergies. The next time a telecom CEO wants to defend that pricy acquisition, then such graphs are a good start,

Wednesday, June 5, 2013

3 reasons why BSE is better than NSE for retail investors

 By no means am I a fan of the BSE-I consider it as an old boys club which was dragged to the technology age kicking and screaming after the entry of NSE. However, sometimes things change, and then one needs to revise the views. The reasons are explained below
  1. Less co-location, so more parity for retail investors As per the SEBI discussion paper on co-location, the BSE had much less co-location orders as compared to NSE. What is means for you as a retail investor is that when you see an arbitrage and try to execute, you are not too much disadvantaged against a server http://www.sebi.gov.in/cms/sebi_data/attachdocs/1367581007462.pdf
  2.  Excellent stock price page with easily accessible filings:-BSEIndia gives you the PDFs while NSE gives you the zip file of annual report/other filings. Also, BSE beats NSE hands down here.
  3. Easily searchable stock news filings page:-Try searching company announcements on both NSE and BSE, you'll see my point.
Given that your broker would route the order to BSE/NSE depending on their costs/best price route etc, you'll have little control on who gets your business. However, do keep it in mind. 

Saturday, June 1, 2013

How to learn financial modeling in India using Excel

I thought a specific post of this nature is relevant to many Indian readers, given that even many top Bschools do not specifically teach this in their post graduate programs -XLRI being a notable exception which has a financial modelling elective, and even ISB where the Finance club arranges financial modelling sessions at a nominal price for those interested. While Bschools do have a MDP(Management Development Program, the question is how qualified are the faculty to teach this subject being a blend of art(spreadsheet design) and science(finance, Excel). Those who have done financial modelling themselves on the job and/or taught it to new joinees, are imho, the best ones to teach this subject. If you are lucky enough to have experienced an analyst training program in an investment bank/PE etc, then you would have got in person training and don't need this post, but most people are not that lucky. From my survey online, even distance learning/fully online financial modelling programs start around Rs 12,000, with classroom coaching going upto Rs 20,000-25,000. It is ironic that we may shell out upto Rs 10lakhs for a Tier II Bschool, but hesitate to pay 1%-1.5% of that for top class training material. Anyways, I suggest the following steps
  1. For those who want an idea what this is all about, free introductions to the subject are available at http://www.everythingaboutinvestment.com/2012/03/learn-financial-modelling-for-free-in.html and www.edupristine.com/ca/free-30-day-course/ to get a flavour of the subject. A series of blogposts(thoda marketing material here too) at http://chandoo.org/wp/2010/07/21/financial-modeling-introduction/ will also give a good flavour of the same. 
  2. If you are doing this just from interest/learning purpose, then the above links should give you enough insight on what to Google for. If you have a basic knowledge of Excel and advanced finance awareness, then self study should be enough. Otherwise check in your local bookstore for financial modelling Books like http://www.flipkart.com/mastering-financial-modelling-microsoft-excel-2nd/p/itmdytsuehfdcpbx are an option, or else check on Amazon for the top rated books. 
  3. If you still want training, then the options include Edu-Pristine, IMS Pro School etc
  4. Interestingly, Indian institutions like Educorporate Bridge offer limited online access for just 90days to their courses online, but on MMOC sites like www.udemy.com, they offer lifetime access with 30 days money back guarantee. Just compare https://www.udemy.com/financial-modeling-using-excel/ and https://www.educorporatebridge.com/online-training/project-finance#tabs-2  Maybe they trust foreign users more or are just forced to do so, but it is strange.
  5. Once you feel you have rockstart financial modelling skills, then consider entering the global championship http://www.modeloff.com

RBI disclaims regulation of non banking financial sector(NBFC) LLPs

 In an earlier blog post in Jan-13, I'd written http://financeandcapitalmarkets.blogspot.in/2013/01/warren-buffets-investment-partnerships.html that RBI regulations apply to NBFCs(non banking financial COMPANIES) and not to firms, why should the LLP be subject to this? Section 14 of the LLP Act 2008 states that On registration, a limited liability partnership shall, by its name, be capable of.....(d)  doing and suffering such other acts and things as bodies corporate may lawfully do and suffer. Section 2(d) of the LLP Act2008 defines body corporate.... “body corporate” means a company as defined in section 3 of the Companies Act, 1956 (1 of 1956) and includes..Therefore, since LLP is a body corporate under the Act and subject to other acts applicable to body corporates, the RBI NBFC norms will apply to it to the same extent that they would apply to companies. 

However, in its circular yesterday, the RBI expressed the view that
rbi.org.in/scripts/FAQView.aspx?Id=92  LLPs are regulated by the Ministry of Corporate Affairs and not by it. Is this a case of regulatory arbitrage, given that LLPs are explicitly an alternate to private sector companies? And more importantly, will the Registrar of Companies dispense with RBI approval for LLPs on the basis of this circular? only time will tell.