While the companies refused to speak on the size of the deal, sources in the know pegged Bharti’s cost of acquisition at Rs 1,600 crore. This money will be used for paying the outstanding amount for the spectrum that Telenor has acquired, it is learnt. Bharti Airtel will also take over Telenor’s contracts for tower lease and infrastructure.
The spectrum payment will be made in phases for the next 10 years. Saying that telecom was a “spectrum game’’, a source added the additional spectrum of 43.4 MHz in the 1,800-MHz band, known for 4G data efficiency, coming from Telenor, was expected to be “more than sufficient for Bharti over the next four to five years”.
Bharti claimed the acquisition would bolster its footprint with the additional spectrum band, besides eliminating smaller and fringe players.
Whether the deal would help Bharti take on Reliance Jio in the fiercely competitive environment, an analyst said, “Market forces along with customer service and network quality would determine the winner.’’
The acquired company’s debt of about Rs 1,500 crore will be serviced by Telenor itself, executives said.
While Bharti would gain around 44 million new subscribers, adding to its current base of 269 million, once the deal fructifies by end of the year, Telenor would get to exit without paying any severance charges for its infrastructure contracts and tower lease deals. Bharti would replace Telenor in those agreements with the likes of IBM, Ericsson and Nokia.
Telenor, which was among the telcos to get as many as 122 licences in 2008 under then telecom minister A Raja, has had a stormy run in India that had begun with a venture with real estate company Unitech. Subsequently, Unitech faced charges in the 2G spectrum scam and Telenor went on a solo ride. The Norwegian company, which had bet on India as the fastest growing telecom market, is exiting India to cut its losses, experts said.
Sigve Brekke, chief executive officer (CEO) of Telenor Group, said, “Finding a long-term solution to our India business has been a priority for us, and we are pleased with our agreement with Airtel. 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.”
According to Gopal Vittal, managing director and CEO (India and South Asia), Bharti Airtel, “On completion, the proposed acquisition will undergo seamless integration, both on the customer as well as the network side, and further strengthen our market position in several key circles.” The proposed transaction will also create substantial long term value for Bharti shareholders given the significant synergies, Vittal said.
Shares of Bharti Airtel opened at Rs 371.80 on the BSE and closed at Rs 363.50, after touching a 52-week high of Rs 400.65.
The takeover would fortify Bharti against competition like Jio and also the proposed Vodafone-Idea merger, telecom expert Mahesh Uppal said.
As part of the agreement, Bharti will acquire Telenor India’s running operations in seven circles — Andhra Pradesh, Bihar, Maharashtra, Gujarat, UP (East), UP (West) and Assam. These circles represent a high population concentration and, therefore, offer a high potential for growth, the Sunil Mittal-led company stated.
Telenor had signed a JV with Unitech in 2009 and it invested Rs 6,135 crore through equity and a little over Rs 8,000 crore in debt.
“From Telenor’s perspective it must be disappointing to exit the market because they have significant presence in South Asia, in Pakistan and Bangladesh,” an analyst said. However, good commercial sense seems to have prevailed, he added.
According to sources, there will be downsizing of Telenor India’s 4,000 employees, including 700 permanent ones. Bharti has around 19,000 employees, and there could be overlaps in roles.
Entry of Reliance Jio in September 2016 and its free promotional offers have forced the industry to work towards consolidation. Some experts are of the view that consolidation is the only answer to battle a newcomer like Reliance Jio.
Analysts feel that the end consumer would be a beneficiary of consolidation as the top four players will be expected to make substantial investments towards improvement of infrastructure.
- In 2006, Hutchison exited the Indian market with Vodafone buying a controlling stake in the company
In 2012, Dubai-based telecom major Etisalat shut operations of its Indian arm, following SC judgment to cancel 122 licences
In 2012, Sistema hinted at scaling down India operations, after SC cancelled 21 wireless telephony licences of SSTL, its Indian JV
- In 2014, NTT DoCoMo announced wrapping up operations in India. Following this, DoCoMo and Tata Teleservices, its India partner, got into a spat over payment for which the litigation is on