Q) Reliance Jio is planning to enter Africa in 2019.

Identify potential opportunities for Inorganic

growth. What would be the value of such opportunities? Identify at-least 3.

Various potential opportunities for inorganic growth are:

1. Lack of infrastructure
Many countries in Africa lack proper national telecommunications infrastructure to
deliver voice and data services to their businesses and people. Companies can come
together to share the fiber network.
2. The access to mobile data outside urban centers remains limited
Currently operators face high costs of expansion outside of urban areas. This is because
of lower demand from lower penetration of smartphones in rural areas. This makes
economics of expansion very challenging. Already the ARPU (Average Revenue per User)
has been declining some countries like Algeria, Sudan and Egypt because of companies
reaching out to low usage segments. Mergers between companies will help increase the
ARPU in such low-usage areas.
3. Over-crowded telecom space
Many markets have experienced periods of accelerated price declines. High competition
between the players resulted in declining prices for telecom usage and the financial
performance of these companies. Companies can merge their operations or acquisitions
by bigger players can be made, so that the competition in the industry comes down and
the suppliers can have a higher bargaining power.
4. Triple Play
Since voice revenues are dropping because of price wars, companies are now shifting
focus to data. The demand for data is already increasing in Africa. The undersea cables
which promise to bring faster connectivity to Africa, are opening Africa to the possibility
of triple-play services. As this evolves, Merger and Acquisition deals between companies
having data licenses where converged licenses are not allowed, media providers may
help in driving M&A deals.

Value of these opportunities:

1. Scaling benefits by integrating key support functions across various geographical units. Also, the
competition within a region becomes less providing greater leeway for price increase.
2. There will be bringing in of skills and competencies which firms may not have possessed earlier.
3. Gaining economies of scale in rural areas. There will be direct impact on operating expenditure
from downstream consolidation and integration benefits.
4. With diversification in case of Triple Play, companies can gain an opportunity for higher
entertainment spends by people who are relatively wealthier.