Airtel acquires India operations of Telenor, shares soar
Bharti Airtel shares rose 11% after it confirmed taking over the India operations of Norwegian Telenor. The move will help Airtel take on competition posed by Jio, it will also allow Telenor to exit the market while Airtel takes over its liabilities. A Deutsche Bank report valued the transaction at about Rs. 2,000 crore. We detail the Airtel-Telenor news, this year's third telecom merger.
Details about Telenor India?
Telenor (India) launched it services in 2009. Its pre-paid services are available in the six circles of UP (West), UP (East), Bihar (including Jharkhand), Andhra Pradesh, Maharashtra and Gujarat with some operations expected soon in Assam. These circles collectively account for over 50% population.
How will this deal benefit Telenor?
The move marks Telenor's exit after the corruption investigation into VimpelCom, the Russian telecom-group in which the Norway-headquartered company has a large stake. The scandal saw Telenor losing all its licences by a Supreme Court order. Telenor was forced to strike down the operations value by about Rs. 5,000 crores in India last year. Airtel will assume Telenor's spectrum liability worth Rs. 1,650 crore.
How will this move benefit Airtel?
The 43MHz of 1800MHz spectrum across seven circles is the biggest benefit to Airtel from this development. Telenor brings valuable spectrum in the circles where Airtel's spectrum holding is lower than average. Airtel will not assume Telenor's debt. Airtel has to up its game to take on competition from Jio and other freshly-merged telecom entities vying for the top position.
Airtel acquiring Telenor in an easy deal
While the companies refused to speak on the size of the deal, it is known that the Rs. 1,600 crore will be used for paying the outstanding on Telenor's acquired spectrum. Bharti Airtel will also take over Telenor's contracts for tower lease and infrastructure.
Consolidation phase in Telecom sector following Jio's arrival
The price war triggered by the arrival of Reliance Jio has hurt revenues and profits margins of telecom players. Bharti Airtel had reported a 54% drop in consolidated net profit for the December quarter. September-launched Jio's massive investment of $20-25 billion and unprecedented offering of free voice and data for six months to new subscribers have already prompted the Idea-Vodafone, RCom-Aircel mergers.
PM unhappy with telecom services, pushes for accountability
Prime Minister Narendra Modi has sought accountability in Indian telecom industry (2nd largest globally) after reviewing mechanism for handling grievances. "Most of the grievances are related to issues of poor service quality, connectivity and non-functioning of landline connections," a PMO statement announced on Thursday.