Bharti Airtel, India's biggest service provider, is believed to be in advanced talks to acquire Telenor's Indian business for $350 million, according to media reports.
The news follows earlier reports that Telenor Group (Nasdaq: TELN) was in discussions with Idea Cellular Ltd. , India's third-biggest operator, regarding a possible acquisition. Last year, Telenor was also thought to be holding M&A talks with Vodafone India , the number two player.
Telenor has hit a rocky patch in India and has now been trying to exit the market for some time. It also sat out spectrum auctions last year, blaming its decision on the high reserve prices the government had set for licenses. But finding a bidder before October, when those auctions were held, would have been much easier. Having bolstered their spectrum portfolios, India's other telcos are no longer as hard pressed to acquire Telenor.
Even so, Telenor does own spectrum in the valuable 1800MHz band in the six circles (service areas) of Andhra Pradesh, Bihar, Gujarat, UP (East), UP (West) and Maharashtra. Bharti Airtel Ltd. (Mumbai: BHARTIARTL) would stand to augment its 4G spectrum holdings in all these circles should a takeover go through. Telenor has also recently upgraded its network, which would definitely appeal to Bharti Airtel.
On the other hand, Bharti Airtel would be taking on more debt with an acquisition. It already has a net debt of 834.38 billion Indian rupees ($12.23 billion), while Telenor owes 2.4 billion Norwegian krone ($280 million) to the government (excluding any penalties) and another NOK2.3 billion ($270 million) to financial institutions.
Nevertheless, circumstances are driving India's service providers operators toward consolidation, with smaller players exiting the market. The arrival last year of a new 4G company in the shape of Reliance Jio has provided a major spur to M&A activity, as sub-scale operators struggle to compete. Reliance Communications Ltd. , India's fourth-biggest operator, has already acquired Aircel Ltd. and Sistema Shyam TeleServices Ltd. , two smaller companies, while Bharti Airtel has snapped up another provider called Videocon Telecommunications Ltd. .
Telenor's sojourn in India has been rife with controversies, most notably the Supreme Court's cancellation in 2012 of the operator's licenses, as part of an anti-corruption order. As Bharti Airtel will have noted, the spectrum that Telenor subsequently acquired can be used to support any technology.
— Gagandeep Kaur, contributing editor, special to Light Reading