Bharti Airtel Journey of the Mergers and Acquisition Street

Airtel Telenor merger is the new talk in the telecom sector. Have a look into the details of the deal.

The telecom sector in India has seen some heavyweight mergers in the last few months. The acquisition was aimed to increase existing market share and add up to the customer base by leveraging the new company. Airtel, which used to be the telecom company with the maximum market share, was dethroned from its place by the combined Vodafone-Idea. Airtel has sensed this long back and it has been trying to gain back its spot by the M&A route.

The statistics of Airtel-Telenor merger.

Numbers speak out loud that post-merger Airtel and Telenor would make around 35% market share in Telecom Industry. Source: Mint

In line with such takeover telecom giant Airtel acquired Telenor in February 2017 to compete with the Vodafone-Idea merger and the staunch rival Reliance Jio. Airtel shall move the Telenor user base of around 44 million subscribers to its own user bracket in a deal. According to BNP Paribas Securities India Pvt. Ltd, Airtel considered Telenor’s spectrum liability (Rs1,650 crore) and tower contracts, but not the debt. BNP Paribas believes that Airtel has got an attractive deal, given that smaller operators are running out of options in the intensely competitive Indian telecom market. “The sale price is clearly very low for a business with 44 million users,” Credit Suisse said.

What to expect after the deal?

Consolidation will leave three main operators in the Indian telecom market and can potentially improve the profitability of operators in the long term. Earlier, 2nd largest telecom giant Vodafone merged with the 3rd biggest enterprise Idea in a similar deal.

Other Acquisitions

1) Airtel-Tikona merger

Airtel has not lost out to leverage any opportunity in the journey of being India’s biggest telecom player. Source: Economic Times

In a similar deal, Bharti Airtel acquired high-speed internet service provider Tikona Infinet Limited in March 2017 for access to the Tikona’s 4G spectrum in Gujarat, UP (East), UP (West), Himachal Pradesh and Rajasthan. Bharti Airtel had announced plans to buy Tikona Digital’s 4G infrastructure for Rs 1,600 crore earlier in its bid to boost its high-speed broadband spectrum holdings for taking on Reliance Jio Infocomm and the Vodafone-Idea Cellular combine in a fiercely competitive market that is in the midst of consolidation.

2) Airtel – Tata Teleservices

In another transaction announced last year, the debt-ridden loss-making firm Tata Teleservices will be acquired by Bharti Airtel. The deal is on a no-debt, no-cash basis, implying Airtel is not taking over any of the about Rs 40,000 crore debt of Tata Teleservices and is neither paying any cash. The deal, subject to regulatory approvals, will see over 40 million customers of consumer mobile operations (CMB) business of Tata Teleservices (TTSL) and Tata Teleservices Maharashtra (TTML) joining Bharti Airtel and mark further consolidation in this sector.

Benefits to the overhauled Airtel

In May 2018, Department of Telecom approved the merger.

  • The deal will be transferred to Bharti Airtel in seven circles of Telenor. Telenor service is provided in Andhra Pradesh, Bihar, Maharashtra, Gujarat, and UP (East and West). The services of Telenor customers continue as long as the transaction is completed.
  • Post above acquisitions Airtel Revenue Market Share will be 35% as against Voda-Idea 40%.
  • The tax benefits of Carried forward loss of around INR 5500 crore can be claimed by Airtel within one year with current profit size of the company.
  • The spectrum of Telenor will now be of Airtel. The 43MHz of 1800MHz spectrum that Airtel will acquire across seven circles as part of this deal is the biggest benefit to Airtel from this development. It will help further strengthen Airtel’s spectrum holding.

What’s in future for the telecom industry?

RCom and Aircel Limited were looking at merging their operations for business viability in a tough operating environment. However, the merger lapsed due to regulatory issues, legal issues, objections by interested parties and delays in receiving relevant approvals.

In what could be considered as a transformational era for the Indian telecom sector, we saw telcos consolidate like never before, leaving just three major players in the market by the end of the year. It only proved that the telecom sector has become a money guzzler where only those with deep pockets can survive. It is expected that the competition will remain fierce amongst Vodafone Idea, Airtel and Jio. This may not be a good news for the industry but it is definitely a good news for the consumers!

Author | Kshitij Chitransh