Bharti Airtel Ltd is in the final stages of talks with Tikona Digital Networks Pvt. Ltd to buy the latter’s 4G spectrum, as India’s largest telecom company seeks to increase its capacity to offer data services to customers.
The deal would be another step in the process of consolidation set off by the aggressive pricing strategy of Mukesh Ambani’s Reliance Jio Infocomm Ltd, which entered the telecom industry in September.
The Bharti-Tikona transaction could be in the range of Rs800-1,000 crore, three people familiar with the matter said on condition of anonymity. Tikona has some debt on its books which Airtel will assume, so the overall deal value is close to Rs1,500-1,700 crore. The deal will be split into multiple tranches.
Tikona is hiving off its wireless broadband business, Tikona WiBro, which it will continue to run independently.
Tikona bought 20 megahertz (MHz) of 4G airwaves in the 2,300 MHz band in the 2010 auctions in Gujarat, Himachal Pradesh, Uttar Pradesh (East), Uttar Pradesh (West) and Rajasthan for Rs1,058 crore.
Airtel has limited 4G waves in the band in circles where Tikona, a Mumbai-based network solutions provider, has spectrum. For example, in UP (East), UP (West) and Rajasthan, it has no airwaves in the 2,300 MHz band. In Gujarat and Himachal Pradesh, it has 10 MHz each.
“The idea is (for Airtel) to strengthen the overall portfolio and increase capacity to offer data. The deal will help get pan-India 4G coverage in 2,300 MHz band...it will help Airtel fill the gaps in 2,300 MHz,” said one of the three people cited above.
An Airtel spokesperson declined to comment. An email sent to Prakash Bajpai, chief executive officer of Tikona, remained unanswered. He did not respond to text messages and phone calls.
The move comes less than a month after Airtel said it would acquire the Indian operations of Norway’s Telenor ASA to strengthen its presence in the 1,800 MHz band. The transaction gave Airtel access to 44 million customers (increasing its user base to 307 million), 43.4 MHz of spectrum in the 1,800MHz band and 20,000 base stations.
Competition has intensified after Reliance Jio’s entry, spurring consolidation in the telecom sector. Vodafone Group Plc.’s India unit and Idea Cellular Ltd are discussing a merger of their operations to create a company that would overtake Airtel. In September, Anil Ambani’s Reliance Communications Ltd signed an agreement to merge its wireless business with smaller rival Aircel Ltd to create India’s third largest telecom operator by users.
Reliance Jio has signed up more than 100 million subscribers in about five months by offering free data and voice calls, undercutting established rivals and eroding industry profitability. Jio has also forced other telcos to beef up their data capacity.
Jio’s parent Reliance Industries Ltd estimates that India’s telecom industry’s revenue will increase 50 percent from the current levels to Rs3 trillion by 2021, largely driven by demand for data, while voice revenue will fall from Rs1.5 trillion to Rs0.5 trillion.
According to a sector expert who spoke on condition of anonymity, the consolidation suggests that the industry’s return on invested capital levels are unsustainably low and spectrum ownership and ability to spend will be key to survival in a high data volume environment.
“Our understanding is that Bharti’s balance sheet and solid spectrum portfolio put the company in a position to benefit, especially when Jio starts to charge for its services from 1 April,” the expert said.
If the Tikona deal happens, Airtel will not breach norms set by the industry regulator barring phone operators from holding more than 50 percent of spectrum in each band (excluding 800 MHz) in each circle.
According to Telecom Regulatory Authority of India rules, an operator can hold a maximum of 50 percent revenue share, 50 percent subscriber share and 50 percent spectrum share in each band (excluding 800 MHz) in each circle. – Livemint