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The Case:

Mobilink is the largest player in the Pakistani wireless market, while Warid is at No. 5, according to the VimpelCom(world’s largest telecommunications providers). Mobilink along with its partners announced merger of Warid with Mobilink, which is due to be completed by the second quarter of 2016; subject to regulatory approvals by the Competition Commission (CCP) and the Securities and Exchange Commission of Pakistan (SECP). As part of the transaction, Mobilink will first acquire 100 percent of Warid’s shares and Warid telecom, acquiring approximately 15 percent of the shares of Mobilink. The merged entity will serve over 45 million mobile customers. CEO Munir Farooqui at Warid termed the deal a win-win situation for both the companies.

Requirement:

Being a student of Economics, analyze the situation of Warid and Mobilink telecom merger and identify that which market structure is applied in this case? What will be the benefit of this merger to both companies according to suggested market structure?

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Marks: 20

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Replies to This Discussion

its not of marks 5...its 20 marks activity

iss mein batya bi nahin hai k gdb kitnay words par mushtamil hoo ga......aur yeh bi kha dya hai k clear and concise hona chahye.........ab sub batao k 20 numbers ka gdb kitnay words par mushtamil hoo ga ????

jab words mention nahi hoty kitnay hongay to jitni marzi likho no issue pehlay b semester me aise gdb aye hain jis me words nahi bataty magr iska matlab hai no pabandi 

Alright ......thanks  maham

plz share ur ideas for gdb

 kon sa market structure applied ho ga iss case mein ???.......... aur kya benefit ho saktay hain market structure k hawalay say 2ono companies k merge honay say????....plz guies share ur ideas and thoughts  ...for gdb

Kisi ko bi nahin pta kya k yeh gdb kis market structure say belong karta hai????

Here market structure is oligopoly. 

koi tu solution batao is ka?

guies .....yeh market structure oilgopoly structure say relate karta hai ...........aur moblink and warid ka merge honay ka maqsad  mutual consent....bahmi tawan ....say single firm behave kartay hovay ...maximize profit kamana hai.....

so 20 marks k liye pehlay app yeh bta dena kis market structure say relate karta hai....then yeh bta dena k kyu relate karta hai oilogopoly say ..............2nd part mein iss k merge honay k faida bta dena hai.....bus iss gdb ko pehla kar app logo nay likhna hai 20 marks k liye ......i think 500 words par to mustamil ho ga gdb 2ono parts .......and ans kartay waqt  page 81 on handouts par collussion point part lena 3 heading of oilogopoly structure.........app logo nay to share nahin kiya but sorry main aisa nahin hoo..

ECO 401 GDB SOLUTION

By Zarak

 

Concept: The merger between the Mobilink and Warid telecom is called the Horizontal merger.

In the horizontal merger two firms in the same industry form one large company, usually the bigger firm swallow the smaller one .in our case this is the Mobilink the bigger firm swallow the smaller firm like the Warid.

Companies in the this case are the direct competitors in the industry .

 

Definition:

Horizontal merger are those merger in the market structure in which the firms producing the similar kinds of the commodities or running the similar business merge with the one another.

Second Definition:

Horizontal merger are those merger in which the two companies operating in the same industry and geographically in the same area merge with each other instead of competing with one another under the horizontal merge they just become one entity.

Advantages of the Horizontal Merger

1. Reduction in Rationalization

The biggest advantage of the horizontal merger is that I will reduce the industrial competition between the Mobilink and the Warid Telecom in the telecommunication industry as the company being one entity will reduce the undue stress how to tackle competition and concentrate on the more of the improving of their services and products and giving the costumers the best services by giving it at low prices in the market.

2. Increase market shares

Through reduction in the competition there will be an increase in the market shares, revenues and profits between the Mobilink and Warid Telecom.

3. Reduce costs

 From the costumers point of view it will be the bigger network and better coverage while at the same time reducing the numbers of the stations and the sites, which will reduce the cost of the production and will good for both of the companies in the industry.

4. Economies of Scales.

.The horizontal merger will give the two companies the benefit of the economies of the scale because as the size of the company increases the price per unit of the production decreases as there will be the elimination of the duplications of the machinery, increase in the bargaining power of the two companies due to the increase size of the merge companies.

There will be the less expenditure on the advertising and publicity leading to company delivering the product at the lower price to its costumers than before.

5. Diversifications

The merged company will be able to capture the more consumers than they would as an individual entities e.g. Mobilink and Warid .There will be the great range of the prices options presented to the consumers at the point of the sale.

 

 

6. Better Management  

It will be  easier for top management of the acquiring company to manage the target company which is in the same business rather than acquiring taking over that company which has completely different business and hence chances of top management successfully handling both the companies increases in case of horizontal merger.

Please Discuss here about this GDB.Thanks

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