Is a due diligence exercise different in case of telecom industry?
The answer to this question is both no and yes. No, because this exercise, by its very nature, involves ascertaining that there are no hidden liabilities that an acquirer might end up taking over. The carrying value of assets in the books is representative of their revenue generating capabilities. The historical revenues and profits are sustainable going forward. And `yes,’ because the deal drivers in this industry, many a time, are based more on operations than on finances. We have seen purchase consideration being paid on an agreed value `per subscriber’ rather than the more conventional methods of a multiple of revenue or EBITDA (earnings before interest, taxes, depreciation and amortisation). This essentially means focusing the diligence exercise more on ascertaining the actual subscriber base, assessing its revenue generating capacity and probability of continuing on the network, quality of ARPU (average revenue per user), definition of ARPU, and so on. Even when the transaction i
