DoT approves merger of Bharti Airtel and Telenor India

The merger will boost the 4G spectrum holdings of Sunil Mittal-led Bharti Airtel group, which has been competing against Mukesh Ambani-controlled Reliance Jio Infocomm.

May 15, 2018 11:26 IST
facebook IconTwitter IconWhatsapp Icon

The Department of Telecommunications (DoT) on May 14, 2018 approved Bharti Airtel’s acquisition of Telenor India. The department has transferred all licences belonging to the Indian unit of Norway-based Telenor to Bharti Airtel.

With this approval, Bharti Airtel will buy Telenor India in a no-cash deal and will take over its outstanding spectrum payments of Rs 1650 crore.

Legal dispute over the requirement of bank guarantee

The Airtel-Telenor merger had been in talks since February 2017, however, was stalled by a legal dispute over the requirement of furnishing a bank guarantee.

Earlier in May 2018 itself, the Supreme Court quashed DoT’s offer to make Bharti Airtel furnish a bank guarantee of Rs 1499 crore as a condition for approving the deal. The court was hearing DoT’s plea against the Telecom Disputes Settlement & Appellate Tribunal’s interim order dated April 12, 2018, directing the department to clear the buyout of Telenor India without requiring a bank guarantee.

How this deal will be significant for Bharti Airtel?

• The Bharti Airtel and Telenor India merger will boost the 4G spectrum holdings of Sunil Mittal-led Bharti Airtel group, which has been competing against Mukesh Ambani-controlled Reliance Jio Infocomm.

• The Telenor buyout will boost Bharti Airtel’s adjusted gross revenue by around Rs 1400 crore annually, which in turn, will significantly sustain its operating income.

• The deal will also fortify Bharti Airtel’s network capacity. It will gain 43.4 units of 4G spectrum from Telenor India across Andhra Pradesh, Bihar, Maharashtra, Gujarat, UP-East, UP-West and Assam.

• The company will also gain Telenor’s operational contracts, tower leases and about 39 million subscribers.

• The deal will help the company in consolidating its market leadership position with over 330 million customers.


Telenor India: A Financially Stressed Telecom

• Telenor India, for long, has been looking for a long-term solution for its Indian business, which has been losing Rs 4 crore a day with a customer base that has been shrinking gradually.

• Telenor India is currently burdened with almost Rs 6000 crore of debt, however, this debt is expected to be borne by Telenor itself. Airtel will only take over Telenor India’s outstanding spectrum payments.

• Telenor India’s subscriber base has reduced to a little over 39 million from 44 million in February 2017. Of 39 million, only 67 percent of the users were active in February 2018.

Other significant mergers in Telecom Sector

Vodafone India-Idea Cellular deal: Idea Cellular, owned by Kumar Mangalam Birla, in March 2017 announced the merger of Vodafone India and its wholly-owned subsidiary Vodafone Mobile Services Limited with itself. However, the operators are awaiting the final nod from the Department of Telecommunications.

Reliance Jio acquires RCom's wireless assets in USD 3.75 billion deal: Debt-laden Reliance Communications in December 2017 sold its wireless assets to Reliance Jio Infocomm for a total value of around USD 3.75 billion or Rs 240 billion.

Tata Tele offers its services under Bharti Airtel's network operations: After separating from Japan's DoCoMo, Tata Teleservices Limited sold its consumer mobile business with 40 million subscribers to Bharti. As a part of the deal, Tata Teleservices Limited will transfer the business on ‘cash free and debt free’ basis to Bharti.


Download our Current Affairs & GK app For exam preparation

डाउनलोड करें करेंट अफेयर्स ऐप एग्जाम की तैयारी के लिए