Bharti Airtel buys Telenor India

In a surprise announcement, Bharti Airtel said it was taking over Telenor India, marking the first such transaction since Idea took over Spice Telecom several years ago.

Typically, companies in Indian telecom sector sell only assets, such as spectrum, and never the whole unit, due to the high debts on telecom companies’ balance sheets in India.

The pricing details were not announced. It is likely that Airtel is not paying a substantial amount to Telenor as part of the transaction due to the unfavorable financials of the acquired unit.

However, Telenor said the “remaining value of tangible and intangible assets in Telenor India” amounted to 0.3 billion kroners, or about Rs 3000 cr as of fourth quarter 2016.

“As the new owner, Airtel will take over Telenor India’s spectrum, licenses and operations, including its employees and customer base of 44 million. Telenor’s operations and services will continue as normal until the completion of the transaction,” Telenor said in a separate statement.

Airtel is India’s largest wireless operator with over 269 million subscribers and a revenue market share of over 33 per cent.

Telenor had found it difficult to continue in the Indian market as it was too small a player in a market that is seeing a rapid rise in competition. Moreover, the company’s spectrum footprint in India is too small to allow it to be a serious player in the data market.

The voice market, which was the primary segment when Telenor entered India eight years ago, is no longer the main driver and is increasingly giving way to the spectrum-intensive data market.

“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 Norwegian company said.

“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 would not have given an acceptable level of return.”

For Airtel, the move marks yet another step towards consolidating its position in the Indian market.

The company, the largest in India by revenue and subscribers, is expected to be pushed to the second place once Vodafone and Idea Cellular, the No. 2 and No. 3, announce a merger in the coming days. The two players are currently in talks for a share-swap-based merger.

“The proposed acquisition will include transfer of all of Telenor India’s assets and customers, further augmenting Airtel’s overall customer base and network. It will also enable Airtel to further bolster its strong spectrum foot-print in these seven circles, with the addition of 43.4 MHz spectrum in the 1800 MHz band,” the Indian company said.

The transaction will not trigger any impairment for Telenor.

According to the agreement, Airtel and Telenor India will merge and Airtel will take over Telenor India as soon as all necessary approvals are received.

As part of the agreement, Airtel will take over outstanding spectrum payments and other operational contracts, including tower lease.

The transaction is subject to requisite regulatory approvals, including approvals from the Department of Telecommunications in India (DoT) and the Competition Commission of India. The exposure to claims related to the period Telenor owned the business, will remain with Telenor.

The transaction is expected to close within 12 months, the companies said.

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 announced its entry into India in 2008. In 2016, Telenor India’s revenues were NOK 6.0 billion and the operating cash flow was NOK -0.4 billion. Telenor services are commercially available in six telecom circles in India (Andhra Pradesh, Bihar & Jharkhand, Gujarat, Maharashtra, UP East and UP West), and the company also has spectrum in Assam.