Bharti Airtel calls off Rs 700-cr deal to buy Loop Mobile

The deal has been called off after Loop was failed to to get regulatory approval from the DoT

Bharti Airtel today called off deal its to buy the assets and transfer the subscribers in Mumbai-based Loop Mobiles for Rs 700 crore, for which the two companies had singed a strategic agreement in February.

The deal has been called off after Loop was failed to to get regulatory approval from the Department of Telecommunications (DoT) even though the company's licence expires on 29th November. The agreement between Bharti Airtel, and Loop Mobile, which operates only in Mumbai circle, also expired on October 31. Yet, in the last few weeks after numerous discussions DoT was veering to the view that the deal should be gven a conditional green single.

When the deal was signed Loop had a subscriber base of 3 million but with uncertainty in the future it has now gone down to 1 million, with many of the subscribers porting out to other competing operators including Airtel.

Bharti had agreed to pay the money based on revenue potential of the subscriber who under the agreement would have seamlessly shifted to them from Loop. But with the TRAI putting a spanner in the move and directing that the Loop subscribers under mobile number portablity have to be given the choice to shift to any operator and not only Airtel.

The move puts Loop, which is 99 per cent owned by the Dubai-based Khaitan family, in a difficult position as it can now only sell its assets which include 350 towers owned by them and electronics equipment on 2100 leased towers apart from 220retail outlets. However the value that it will get for selling these assets will be much lower than what Bharti was ready to pay as it does not include the high ARPU subscribers.

"Bharti has decided to get out of the agreement. Loop Mobile and Bharti applied to DoT for approval of the business transfer in March 2014. However as we have not got approval for the transaction and as our licence expires on November end Bharti has decided to call off the deal" said a spokesperson at Loop Mobile. The spokesperson says that it will now be up to the promoters to decide the next course of action and what they would want to do with the assets.

Bharti Airtel declined comments on the issue.

Loop had decided not to take part in the spectrum auction in February after it struck a deal with Bharti. Also, just before the auctions, the Telecom Disputes Settlement and Appellate Tribunal (TDSAT) had dismissed its plea for renewal of its licence in Mumbai.

While Loop agreed to the regulators demand that their subcribers should be given choice under the MNP to port out to the operators of their choice, there was another sticky issue which stuck the negotiations with the government. DoT has said that that Loop Mobile and its sister concern Loop Telecom owe about Rs 800 crore in spectrum and other charges to the government. The penalty was imposed on Loop for allegedly violating 2G spectrum licence norms by discontinuing operations in 20 circles.

However responding to this questions Loop CEO Sandip Basu had stated that the DoT's demand of about Rs 800 crore was subjudice and the matter is being heard in the TDSAT. Loop has agreed to pay according to the final judicial determination.

Meanwhile, in an internal communication within the DoT, the ministry had indicated that it would give an approval for the proposed transfer of assets of Loop Mobile (India) to Bharti Airtel. According to the DoT discussion, the DoT has stated that there was no specific provision or prohibition of slump sale in the licence terms or guidelines, and as Bharti Airtel and Loop Mobiles are meeting all the regulatory requirements and have addressed all concerns raised by Trai, the deal should be given a go ahead.

With the deal being called off, Rs 215-crore pending loan given by Axis Bank to Loop Mobile will be at risk, the bank had informed the DoT earlier. A consortium led by Axis Bank had given Rs 350 crore of advanced loans to Loop Mobile and the current outstanding stood at Rs 215 crore.

In a statement to the stock exchanges, Bharti Airtel said: “Under the agreements executed with Loop Mobile, the transaction was conditional upon DoT approvals, which even as of today has not been received. In this regard we have been in discussions with Loop. Loop had late last evening sent us an email noting that DoT approvals had not yet been received and had also noted that it was way beyond the time envisaged for securing such approval.”

“In light of this update and the fact that Loop’s mobile license is to expire at the end of this month, we have decided to terminate the discussions with regard to the transaction for acquiring subscribers of Loop. A formal communication to this effect has been released to Loop at 05:19 PM today,” Bharti Airtel added in the statement.

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