India's largest service provider, Bharti Airtel, has entered into a definitive agreement to acquire Telenor India subject to regulatory approvals. The announcement, which did not include details of the financial terms of the deal, came shortly after Vodafone India, the country’s second-largest service provider, announced that it was in talks to acquire Idea Cellular and marks a continuation of the M&A saga underway in India's telecom market. (See What Does Vodafone-Idea Merger Mean for India's Telecom Industry? )
"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," said Gopal Vittal, the managing director and CEO (India and South Asia) of Bharti Airtel Ltd. (Mumbai: BHARTIARTL), in a press release. "The customers of Telenor India will now be able to enjoy India's widest and fastest voice and data network, and a range of Airtel's world-class products and services.”
The local subsidiary of Norway's Telenor Group (Nasdaq: TELN) serves 44 million subscribers in the seven circles (service areas) of Andhra Pradesh, Bihar, Maharashtra, Gujarat, Uttar Pradesh (East), Uttar Pradesh (West) and Assam. Besides gaining those subscribers, Airtel will also pick up 1800MHz spectrum in the same circles.
News of the takeover is not altogether surprising given Telenor India's recent market woes. For some time, the company was said to be in talks with Vodafone India about a possible acquisition, but Vodafone is obviously now focused on the much bigger deal with Idea Cellular Ltd.
Telenor is one of several players that have struggled in the market since the launch of services by Reliance Jio , a new entrant promoting free voice and data offers. That move has had an impact on sales and profitability at longer-established players. Some smaller ones have gone out of business, while Airtel previously snapped up Augere Wireless and Videocon Telecommunications Ltd. (See Jio Piles Further Pressure Onto Indian Old Guard .)
“The decision to exit India has not been taken lightly," said Sigve Brekke, Telenor's CEO, in a statement. "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."
Telenor has had a checkered history in India. Initially, it had success by focusing on the rural segment and claiming to offer the cheapest tariffs. But it ignored the 3G opportunity for too long, preferring to focus on its 2G business. Its journey was cut short when India's Supreme Court cancelled 122 spectrum licenses, including Telenor's, because of alleged irregularities when they were first awarded.
Telenor subsequently acquired licenses in seven circles. Yet the high initial cost of frequencies in these auctions meant it was never able to acquire a significant amount of spectrum. Jio's launch simply proved the final straw.
— Gagandeep Kaur, contributing editor, special to Light Reading