Airtel to acquire Telenor

Airtel to acquire Telenor

On 23rd Feb 2017, Bharti Airtel stated intention to fully acquire Norwegian telecom operator Telenor’s local arm, Telenor India. The deal was to include its subscribers, infrastructure and spectrum.

Is there a transition from price-war to an acquisition war?

 

On 23rd Feb 2017, Bharti Airtel stated intention to fully acquire Norwegian telecom operator Telenor’s local arm, Telenor India. The deal was to include its subscribers, infrastructure and spectrum.

Why is Telenor Exiting India?

Sigve Brekke, CEO of Telenor Group stated that Telenor India did not meet expected levels of return. In 2016, Telenor wrote off US $280 million (Rs 1,879 crore) as impairment, which means the investments unlikely to get a return-on-investment. Telenor’s accumulated losses since it started operating in India in 2008, stands at $2.87 billion (19,229 crore). Telenor has been in talks with multiple telecom operators for over one year. Idea Cellular was also a potential acquirer.

Why is Airtel interested in Telenor?

Airtel seeks to increase it’s existing customer base of 269 million. Telenor has got 52.5 million customers, which will become Airtel’s customers post acquisition. The industry dynamics is changing with new entrants like Reliance Jio reshaping competition.There is pressure on competitors like Airtel to acquire companies to maintain it’s customer base. According to the deal, there is no immediate payment commitment by Airtel for the customer base and spectrum portfolio. But Airtel has agreed to make all future payments of spectrum and mobile phone towers, taking on Telenor’s liabilities.

Assessment

The telecom industry has been witnessing a price war after Reliance Jio, owned by Mukesh Ambani’s Reliance Industries launched its operations in September 2016. It seems like the industry is consolidating thorough mergers and acquisitions, post the price war.  Airtel’s acquisition of Telenor is in conformity with Vodafone’s announced merger with Idea Cellular and speculation that Tata Teleservices is in talks with Reliance Communications to join forces. This process of mergers and acquisitions will continue till three or four prominent service providers are left. The operators most likely to survive are five; Vodafone-Idea Cellular, Bharti Airtel-Telenor, Reliance Communication-Tata Teleservices-MTS-Aircel, Reliance Jio and State-owned BSNL. 

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