Airtel buying Telenor India to ward off Jio threat

India's largest telecom operator Bharti Airtel today announced acquisition of Norwegian Telenor's India unit in the latest consolidation move in an industry where incumbents are joining forces against the disruptive pricing by newcomer Reliance Jio.
Telenor has a customer base of 44 million in seven circles of Andhra Pradesh, Bihar, Maharashtra, Gujarat, Uttar Pradesh (East), Uttar Pradesh (West) and Assam. India business was a loss making proposition for the Norwegian firm.
Airtel will not make any cash payment for Telenor's India unit but will take on Rs 1,600 crore future liability towards spectrum licence fee and mobile tower rentals.
Its market share will rise to 35.6 per cent following the acquisition of Telenor, which currently has 2.6 per cent share in Indian market.

The announcement came days after No.2 player Vodafone and Idea said they are considering merging their businesses to create the biggest telecom operator in the country with about USD 12 billion in sales.
Anil Ambani-led Reliance Communications has already signed a pact to merge its wireless business with smaller rival Aircel.

The consolidation in the otherwise crowded Indian telecom industry has been hastened by Jio's free voice call and data plans, forcing incumbents to slash tariff at the cost of profits.
"The proposed acquisition will include transfer of all of Telenor India's assets and customers, further augmenting Airtel's overall customer base and network," Airtel said in a statement.

Telenor India has 700-800 employees.
The acquisition, which is subject to regulatory approvals, will also enable Airtel to further bolster its strong spectrum foot-print in the seven circles, with the addition of 43.4 MHz spectrum in the 1800 MHz band.
Airtel is India's largest wireless operator with over 269 million subscribers and a revenue market share of over 33 per cent.
"As the new owner, Airtel will take over Telenor India's spectrum, licences and operations, including its employees and customer base of 44 million," the Norwegian firm said in a statement. "Telenor's operations and services will continue as normal until the completion of the transaction."

According to the agreement signed between the two firms, Airtel will take over outstanding spectrum payments and other operational contracts, including tower lease.
(REOPEN DEL45)
The transaction is subject to requisite regulatory approvals, including approvals from the Department of Telecommunications (DoT) and the Competition Commission of India. The exposure to claims related to the period Telenor owned the business, will remain with Telenor.
With effect from first quarter 2017, Telenor India will be treated as an asset held for sale and discontinued operations in Telenor Group's financial reporting.
Telenor entered the Indian market in 2008 and had a revenue of Norwegian Krone 6 billion (about Rs 4,800 crore) and the operating cash loss of NOK 0.4 billion from India operations.

This is the six acquisition by Airtel in last five years. It acquired Qualcomm AP's India business in May 2012, Loop Mobile in June 2014 and Augere Wireless Broadband India a year later. Last year, it acquired Videocon Telecommunications and Aircel dishnet Wireless.
"Airtel will ensure quality services to Telenor India's customers, while offering them the added benefits of its innovative product portfolio, access to superior voice and data services, mobile banking, VAS and domestic/ international roaming facilities. Telenor India's operations and services will continue as normal until the completion of the transaction," the company statement said.
Telenor said the transaction will not trigger any impairment. "As of fourth quarter 2016, the remaining value of tangible and intangible assets in Telenor India amounted to NOK 0.3 billion (Rs 240 crore)."

Gopal Vittal, Managing Director and CEO (India and South Asia), Bharti Airtel, said, "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 further strengthen our market position in several key circles.
"The customers of Telenor India will now be able to enjoy India's widest and fastest voice & data network, and a range of Airtel's world-class products and services," he said.
The acquisition, he said, will create substantial long-term value for shareholders given the significant synergies, he said.

Sigve Brekke, Chief Executive Officer of Telenor Group, said, "We believe today's agreement is in the best interest 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 the significant investments needed to secure Telenor India's future business on a standalone basis will not give an acceptable level of return.