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Bharti Airtel to buy Telenor's India unit as Reliance Jio shakes up telecom sector

Bharti Airtel, India's top telecoms network operator, is buying Norwegian Telenor's India unit, in yet another consolidation move in the country's telecoms sector driven by upstart rival Jio's disruptive pricing.

Bharti Airtel said on Thursday it will buy Telenor (India) Communications Pvt Ltd, as part of which it will acquire the Norwegian company's operations in six Indian states.

A Telenor spokesman said Bharti will not pay any cash under the deal but will instead take on the Telenor unit's commitments to pay for licences and phone towers.

The acquisition, which also includes Telenor's India employees and its 44 million customers, will not lead to any impairment charges for Telenor.

The deal highlights how the entry late last year of Reliance Industries' wireless carrier Jio is shaking up India's crowded telecoms sector. With its free voice and deeply discounted data plans, Jio has pushed rivals to slash rates, sharply eroding their profits.

 Bharti Airtel to buy Telenors India unit as Reliance Jio shakes up telecom sector

A Bharti Airtel office building is pictured in Gurugram, previously known as Gurgaon, on the outskirts of New Delhi, India April 21, 2016. REUTERS/Adnan Abidi/Files

Expectations have grown for continued consolidation, likely culminating in the emergence of a few large players and the exit of smaller players like Telenor, which accumulated losses of 24 billion ($2.87 billion) since entering India in 2008, and has assets in the country of just 0.3 billion NOK.

Britain's Vodafone Group is already in talks to merge its Indian subsidiary with Idea Cellular, potentially overtaking Bharti Airtel as India's largest mobile operator with about $12 billion in sales.

"The decision to exit India has not been taken lightly. 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," Sigve Brekke, CEO of Telenor Group, said in a statement.

Shares of Bharti Airtel, in which Singapore Telecommunications is the second-biggest shareholder, rose as much as 11 percent in Mumbai trade to a one-and-a-half year high after the deal was announced. They were up 4.7 percent in early afternoon trade.

Cut-throat competition

Jio, backed by energy conglomerate Reliance Industries' billionaire owner Mukesh Ambani, has intensified competition in India, the world's second-biggest mobile market after China.

Bharti Airtel reported its lowest profit in four years in the October-December quarter while No three player Idea Cellular posted its first-ever quarterly loss for the same period.

Some of that competition could ease after Ambani said on Tuesday Jio would start charging customers starting in April after accumulating more than 100 million subscribers since its launch.

But Jio will do so at sharp discounts, pricing its offering below the ones provided by Airtel, which will have around 314 million customers after its Telenor acquisition.

Jio and Bharti would potentially compete against a merged Vodafone-Idea entity with 375 million subscribers, forcing remaining smaller players such as debt-ridden Tata Teleservices into urgently finding a buyer. Another small carrier, Videocon Telecom, is in the process of shutting its wireless business.

Reliance Communications has already entered into an agreement to merge its wireless business with smaller rival Aircel.

"Consolidation will add to some more spectrum resources for bigger carriers which will allow delivery of more data and help them in providing better quality of service," said Kunal Bajaj, an independent telecom consultant.

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Updated Date: Feb 24, 2017 07:37:23 IST