In signs of further consolidation in a highly competitive telecom market, Norwegian company Telenor is exiting India, selling its operations in seven circles to Bharti Airtel, the country's largest operator.
The two sides have entered into a definitive agreement as per which, Airtel will acquire Telenor's operations in Andhra Pradesh, Bihar, Maharashtra, Gujarat, UP (East), UP (West) and Assam.
The proposed acquisition will include transfer of all assets of Telenor in India, including customers, further augmenting overall Airtel's customer base and network. The deal will also help Airtel strengthen in spectrum footprint in these markets with the addition of 43.4 MHz spectrum in the 1,800 MHz band.
The consolidation comes at a time the free offers launched by Mukesh Ambani's Reliance Jio have unleashed a price war, and put pressure on earnings of incumbent operators. Airtel's net profit declined 55 per cent in the October-December quarter.
Expanding its footprint is also key for Airtel, since the number two operator Vodafone and third-largest Idea have entered merger talks, a move, if successful, would create the largest mobile phone company in India.
"The agreement underlines our commitment to lead India’s digital revolution by offering world-class and affordable telecom services through a robust spectrum portfolio spread across multiple bands. On completion, the proposed acquisition will undergo seamless integration, both on the customer as well as the network side, and will further strengthen our market position in several key circles," said Gopal Vittal, MD and CEO (India and South Asia), Bharti Airtel.
Telenor, which had been talks with other players for potential tie-ups, said the decision to exit India was not taken lightly and the deal with Airtel was in the best interest of its customers, employees and Telenor Group.
"Finding a long-term solution to our India business has been a priority for us. 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," said Sigve Brekke, CEO, Telenor Group.
Sanjesh Jain, analyst at ICICI Securities, sees this deal as a signal for a larger consolidation in the telecom market.
"Post Reliance Jio's 4G launch, with aggressive free voice calls, we have seen many merger/acquisition news reports and we remain optimistic on consolidation," he said.
Jain believes Bharti Airtel's acquisition of Telenor could be a precursor to more big announcements by Vodafone and Idea as well, since Vodafone has spectrum footprint gaps in some circles.
Reliance Jio, which had rolled out its services for free last year, announced on Tuesday its tariff plans starting April 1, wherein voice calls will still be offered for free. Ambani has claimed that the company has crossed a customer base of 100 million. Jio plans to offer prime membership at Rs 99 and prime customers will be enjoy all the unlimited benefits that were offered in the free period for Rs 303 per month.
Bharti Airtel shares surged as much as 10.9 per cent in intra-day trades, before closing at Rs 366.05, up 1.4 per cent on the BSE.
