Airtel to buy Telenor India to counter Jio, VodafoneIdea
NEW NUMBER Deal to help Sunil Mittalled company add 44 million subscribers
NEW DELHI: Bharti Airtel Ltd agreed to acquire the assets of Telenor ASA’s India business, as the nation’s biggest telecom operator seeks to preserve its position in a market where new entrant Reliance Jio Infocomm Ltd’s aggressive pricing has spurred a wave of consolidation.
As part of the deal, Bharti will assume the Telenor unit’s liabilities related to licences fees and lease obligations for phone towers, a Telenor spokesman said on Thursday. The transaction, which won’t involve any cash payments to Telenor, will give Bharti access to 44 million customers, increasing its user base to 307 million, 43.4Mhz of spectrum in the 1800Mhz band and 20,000 base stations.
The latest deal comes amid fierce competition and follows a move by Vodafone Group Plc.’s India unit and Idea Cellular Ltd to discuss a merger of their operations to create India’s largest phone operator last month. Billionaire Mukesh Ambani‘s Jio phone service has signed up 100 million subscribers in about five months by offering free data and voice calls, undercutting established rivals and eroding industry profitability.
The Telenor transaction is expected to close in the first quarter of the year starting April 1.
Bharti will take on residual future liabilities including around NOK2 billion (₹1,600 crore) of spectrum and NOK5 billion (₹4,000 crore) lease obligations, Credit Suisse said in an investor note.
“The sale price is very low for a business with 44 million subs (subscribers) and NOK6 billion revenues,” Credit Suisse said. “Given the negative NPV (net present value) of the business at least it (Telenor) did not have to pay a big negative price to exit.”
The acquisition comes as a shot in the arm for Bharti, whose 20-year-old dominance over the industry is being threatened by Jio and the merger of the nation’s second-largest operator Vodafone India Ltd and No. 3 Idea Cellular. Expertssaytheconsolidation will leave three main operators in the Indian telecom market and can improve profitability of operators in the long term.
The acquisition will not lead to any impairment charges for Telenor, the company said.
As of December quarter, Telenor India had revenue and Ebitda of $160 million and $20 million, which is 4-5% and 1.5-2% of Bharti’s consolidated quarterly revenue and Ebitda, according to UBS Global Research. Ebitda is short for earnings before interest, tax, depreciation and amortisation, an indicator of operating profitability.
The Telenor acquisition strengthens Bharti in markets such as Gujarat, Maharashtra, Uttar Pradesh East and Uttar Pradesh West in which the company has lower revenue market share (RMS) than its national average. Bharti said these circles offer high potential for growth.
With 56% combined RMS, Airtel will, however, exceed the regulatory threshold (50%) in Bihar.
“On completion, the proposed acquisition will undergo seamless integration, both on the cus- tomer as well as the network side, and further strengthen our market position in several key circles,” said Gopal Vittal, managing director and chief executive officer (India and South Asia), Bharti Airtel. “The customers of Telenor India will now be able to enjoy India’s widest and fastest voice & data network, and a range of Airtel’s world-class products and services.”
Sigve Brekke, chief executive officer of Telenor Group, said the decision to exit India was taken “after thorough consideration”. “It is our view that the significant investments needed to secure Telenor India’s future business on a standalone basis will not give an acceptable level of return.” Reuters contributed to this report