Airtel-Telenor deal done, Idea-Vodafone on weekend: What's next?

In yet another move hinting at a consolidation in the telecom industry, India’s largest telecom operator Bharti Airtel   informed the bourses on Thursday that it will acquire Telenor India’s assets. The exit of the Norwegian telecom company from India comes at a time when new entrant Reliance Jio has acquired 100 million users and the market is awaiting a response on the potential Vodafone-Idea merger. The Airtel-Telenor buyout has also triggered talk of job losses in the industry. According to India Ratings and Research the job cuts are likely to play out only over the next two years. The hiring sentiment in the sector will also take a hit.  The employee salaries are around 4-5 percent of the sales revenues of most big players in the sector, says the India Ratings.





In a regulatory filing to the Bombay Stock Exchange, Airtel said it has entered into a "definitive agreement" to Telenor's Indian assets. The acquisition is also subject to regulatory approvals. “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 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,” Gopal Vittal, Managing Director and Chief Executive ( India and South Asia), Bharti Airtel, said in the filing. The Telenor acquisition will give Bharti Airtel additional spectrum in 1,800 MHz band besides a foothold in seven circles — Andhra Pradesh, Assam, Bihar, Gujarat, Uttar Pradesh (East and West) and Maharashtra — where Telenor operates in. The buyout gives Airtel additional access to 43.4 Mhz spectrum in the 1800 MHz band. “The proposed transaction will also create substantial long-term value for our shareholders given the significant synergies,” Vittal said in the filing. In terms of subscribers, Airtel gets 52.5 million users from Telenor kitty. Currently, Airtel has 269.40 million subscribers across India. Meanwhile, Telenor Group CEO Sigve Brekke said, “We believe today’s agreement is in the best interests of our customers, employees and Telenor Group. Finding a long-term solution to our India business has been a priority for us, and we are pleased with our agreement with Airtel. The decision to exit India has not been taken lightly. After thorough consideration, it is our view that significant investments needed to secure Telenor India’s future business on a standalone basis will not give an acceptable level of return.” Vodafone-Idea Cellular Merger Talks The telecom industry is abuzz with consolidation activity since the arrival of Reliance Jio last September. Currently, Vodafone India and Idea Cellular are in talks for merging their telecom businesses. Vodafone Plc, had on January 30, had said that it is in exploratory discussions with the Aditya Birla Group's telecom arm Idea Cellular for a merger. If the merger talks go through, the merged entity stands to become India’s largest telecom company with revenues of over Rs 80,000 crore. According to media reports, the deal is likely to culminate this weekend itself. Also Read: Vodafone confirms merger talks with Idea Cellular The combined entity would have 43 percent revenue market share and have a 40 percent active subscriber market share, according to brokerage firm CLSA. The merged entity would account for over 25 percent of allocated spectrum and will have to sell about 1 percent to comply with spectrum cap norms, CLSA said. There are, however, regulatory hurdles on the mergers and acquisitions front that await Vodafone and Idea Cellular. M&A norms mandate that revenue market share of the merged entity should not exceed 50 percent in any circle. Also, the rules dictate that spectrum holding shouldn’t exceed 25 percent across all bands and 50 percent in each band individually. Experts see a spectrum cap breach in at least 5 circles in the 900 MHz band. Besides, revenue market share of the merged entity will overshoot the 50 percent threshold in six circles. Tata Teleservices Joins The Fray Meanwhile, Tata Teleservices and Reliance Communications-Aircel-MTS combine are reportedly considering joining forces to counter the tough competition from Reliance Jio. Reliance Communications   (RCom) Chairman Anil Ambani is believed to have initiated talks with the newly-appointed Tata Sons Chairman N Chandrasekaran. If RCom has its way then the combined entity (with the four players RCom-Aircel-MTS-Tata Tele) will become the third largest telecom player in the country after the proposed Vodafone-Idea combine and Bharti Airtel. Also Read: Tata Tele mulls merger with RCom-Aircel-MTS combine Of the 12 telecom players in India, Tata Teleservices ranks ninth with a subscriber base of roughly 53 million. If the merger with RCom-Aircel goes through, then the combined entity will have around 260 million subscribers and a revenue market share of over 18 percent. This compares with Airtel’s 266 million users and 31 percent share, Vodafone’s 205 million users and 23 percent share and Idea Cellular's 190 million users with 19 percent revenue market share. 



Source: Moneycontrol.comChaitanya Gudipaty