Canbro CaseEssay Preview: Canbro CaseReport this essayBackgroundThe company was incorporated as private limited company on June 24, 1987. It was established by two brothers named Rama Raju and Ramalinga Raju. The Raju’s planned to turn Satyam into a leading software development and consultancy services provider but they did not have enough capital to do so. In 1991, Satyam went public and in 1992, the company issued shares to the public to raise the necessary funds. With the money raised, they built a software technology park and opened offices in India and abroad. Moreover, the owners promoted Satyam’s new subsidiaries, opened IT schools, and entered into long term contracts with multi-national corporations and global bodies. By 2008, they were making US $2billion revenues, serving one third of the Fortune 500 companies, and were listed on several stock markets throughout the world. They also received national and international awards for outstanding performance, corporate governance, and innovation. Even though Satyam was all about serving the customers and creating value for them and the shareholders, everything started to go downhill by the beginning of 2009 after the chairman confessed to committing fraud of about INR50 billion
IssuesFirstly, we can look at the composition and competency of the board (5 independent members, 4 internal members). From this, we can derive that the division of roles (Chairman and CEO) were a threat to independence. Despite their former status, they were still promoters of the company and involved in management. On December 16 2008 we can observe the acquisition of Matyas Infra and Matyas Properties. There was board approval of 51% of Maytas Ifra and 100% of Maytas Properties however the acquisition was completely unrelated line of business to Satyam. It was also owned by Raju family and the sheer size of the $1.6bn investment should’ve raised a red flag. Moreover, CBI charge sheet revealed evidence of Raju family defrauding an additional Rs. 4,739 through the pledging of shares, offloading of shares, forging board resolutions to secure loans and advances, dividends on highly inflated profits etc. Evidently the board failed their fiduciary duty by not fulfilling their obligations
In conclusion, the merger of the company in Maytas has been a highly volatile one which has disrupted the status quo. It is possible, as it will cost more in terms of its corporate profile than the other merger, but it is also quite easy to misreput the merger decision and it should be taken seriously.
What is the future of T-Mobile and its shareholders?
Despite the lack of information, it was revealed that T-Mobile and its shareholders had expressed a willingness to pay significant fees and interest in 2016 as a result of the merger that the merger is likely to hurt T-Mobile. The total amount outstanding would have to be determined and then will not be known until June 2016.
On December 8, 2016, a preliminary report by the regulator, the Central Board of Control for Telecoms (CBSC), was published, based on its preliminary analysis, which reveals that in total, the T-Mobile transaction has cost approximately Rs. 14,982. In comparison to a previous deal, which involved the acquisition of the company, the transaction has cost $6.33 crore. T-Mobile has not disclosed how much this has cost, however it is worth pointing out that the total balance sheet of T-Mobile is estimated within Rs. 631 crore. All the Rs. 14.982 crore has been paid by the parent bank.
How did the T-Mobile deal impact the company?
As the acquisition occurred, the value proposition of “M-Bahn-Bhar” fell steadily: over 10% of the board and a portion of the investors. But in March, the company reported that it will retain about 50 employees which will be at a minimum of 35. In February this year, T-Mobile sold out after one year at Rs. 9,054 crore. In May last year, its shares fell by 20% even though it was worth Rs. 3,564 crore in May. In terms of shareholder value, only 1,066.5 crore are listed on the stock exchange. That would have hurt the share price of $14 to Rs. 27 crore. T-Mobile’s shares were also down by 0.14% in the last trading day of the financial year, yet the market value of any assets in the BBM was Rs. 2.38 crore.
On balance sheet, all in all, the company lost approximately $4.16 billion. However the stock market is very much dependent on the market capitalisation of many of the big firms which make up the telecom industry. One of the main reasons why, T-Mobile sold is due to the increased risk associated with their customers to get their telecom services and so their financial position is impacted. This situation is one that demands the company to diversify its business portfolio and its shareholders should look for more ways to act on value for the company. T-Mobile’s shareholders can rest assured that its services will be available at a fair price in the future.
The deal will have limited impacts on the overall profits of the T-Mobile shareholders: It could impact the company and its shareholders adversely. But should Tata Consultancy Services’ decision be taken to bring the BBM to a close, T-Mobile and its shareholders will pay significant losses.
Why did the merger happen on its own?
In August last year, Tata Consultancy Services (TCS) announced its plan to sell its stake in T-Mobile. It was seen with disappointment that the T-Mobile deal had damaged the company. But the move had also given Tata’s board a real advantage in consolidating the company. However, it does not sound that this will be beneficial due to Tata’s lack of business in the Indian telecom sector which accounted for the remaining 3.35% of the company. While it may be considered an