Bharti Airtel is said to be in advanced talks to buy Telenor’s India business in a deal that will involve taking on debt of INR 1,500 crore while allowing the India’s biggest telecom company to add to its 4G spectrum and be better placed to take on new entrant Reliance Jio Infocomm.
The development follows Telenor’s inability to strike a deal with rivals. Reluctant to take on debt, No. 3 Idea is believed to have offered equity, but that didn’t appeal to Telenor’s parent company of Norway, which wants a complete exit from India. Before that, Telenor had started talks with various players, including Vodafone and was seeking around USD1 billion for its spectrum, which has fallen in value over time. Based on the last spectrum auction, this is now pegged at about INR 5,519 crore (USD810 million).
Telenor has 4G bandwidth in the 1800 MHz band in the Uttar Pradesh (West), Uttar Pradesh (East), Bihar, Maharashtra, Andhra Pradesh, Assam and Gujarat circles, which has nearly 54 million subscribers, and its seven circles account for nearly 45% of subscriber share and nearly 40% of industry revenue.
Incidentally, Idea had in March pulled out of a deal to buy Videocon’s spectrum in two circles. A day later, Airtel bought Videocon’s airwaves in six circles. Bharti Airtel and Telenor declined to comment while Idea didn’t respond to queries.
Telenor has marked down the value of its India business by 6.3 billion krone (INR 5,000 crore) since beginning of 2016 — an INR 4,000 crore writedown of the value of licenses alone — and didn’t participate in the October spectrum auctions, signaling its intent to exit a market where it has been making losses and struggled to expand operations.
All major operators have consolidated spectrum through auctions and have limited appetite for more. Had Telenor been able to get a deal prior to auctions, it could have tapped into the demand of telcos like Idea and Vodafone for 4G airwaves.
Bharti bought a nearly 174 MHz of airwaves across the 4G bands of 1800 Mhz and 2300 Mhz and the 3G band of 2100 MHz bands for over INR 14,000 crore in the last auctions. Interestingly, it hadn’t bought 1800 MHz airwaves in Uttar Pradesh (West), Uttar Pradesh (East), Bihar, Andhra Pradesh and Gujarat, five circles that are among the most lucrative in terms of subscriber numbers and revenue share.
The 1800 MHz band is treated as a more efficient and global band compare to 2300MHz band. Buying Telenor makes sense as spectrum harmonisation has made, the smaller telco’s airwaves more attractive. The Department of Telecommunications (DoT) has rejigged allocated frequencies so they are contiguous for operators as part of spectrum harmonisation. 5 MHz of contiguous spectrum is needed for good quality 4G. Since all of Telenor’s spectrum has been bought in the auctions, the airwaves have long validity and can be used for any technology.