NEW DELHI: Bharti Airtel will acquire Telenor India, which operates in seven circles: Andhra Pradesh, Bihar, Maharashtra, Gujarat, UP (East), UP (West) and Assam. The proposed acquisition will include transfer of all of Telenor India's assets and customers.
The deal comes less than a month of the Vodafone-Idea merger talks and the ongoing Reliance Communication-Sistema and Reliance Communications-Aircel merger announcements.
The acquisition of Telenor will give Airtel additional spectrum in seven circles with the addition of 43.4 MHz of spectrum in the 1800 MHz band, and add 52.5 million mobile phone users to its existing 269.40 million subscribers across India.
Bharti Airtel and Telenor have entered into a definitive agreement and the acquisition by Airtel is subject to regulatory approvals. Both companies were tightlipped about the cost of the buyout.
“The agreement on completion will further strengthen our market position in several key circles," Gopal Vittal, Bharti Airtel’s managing director and CEO (India and South Asia), said. “The customers of
Telenor India will now be able to enjoy India's widest and fastest voice and data network, and a range of Airtel's world-class products and services," he added.
The circles currently operated by Telenor represent a high population concentration and therefore offer to Airtel high potential for growth.
Sigve Brekke, CEO of Telenor Group, said, "We believe today's agreement is in the best interest of our customers, employees and the Telenor Group. The decision to exit India has not been taken lightly. 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."
Telenor India's operations and services will continue as normal until the completion of the transaction, according to a company statement.
Airtel’s challenges
Telenor has been a voice operator. With the market going free on voice, it will be difficult to hold on to customers for Airtel unless they cut down the data rates. 4G is the new norm for data in the country and with 1800 Mhz, a potent spectrum was not put to use on the network.
“Airtel will have to invest on re-farming that spectrum in the seven circles…but there are challenges. We have not seen any buyout yield all the dividends,” says Sanjay Kapoor, former CEO and MD of Airtel.
Analysts also point out that Airtel is trying to focus on too many areas and may miss out on the main challenge. “It is a precarious position for Airtel—on the one hand it is transforming from voice to data, facing an onslaught from a challenger (RJio) and trying to protect revenue, and bottom line and also trying to put together a merger—all by the one same management team,” says N.K Goyal, founder of CMIE.
Kapoor cautioned that in such a scenario, Airtel faces the risk of taking its eye off the market.