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Image: Adnan Abidi / Reuters
Bharti Airtel Ltd will acquire the Indian unit of Scandinavian telecom provider Telenor Group as India’s largest wireless provider steps up efforts to meet competition from Reliance Jio Infocomm. Bharti’s shares rose to a high of nearly 11 percent in early Mumbai trading on the news.
Bharti has entered into a definitive agreement with Telenor South Asia Investments Pvt Ltd to acquire Telenor (India) Communications Pvt Ltd. This will give it the latter’s operations in seven circles, and 43.4 MHz of spectrum in the 1800 MHz band, the Indian company told the stock exchanges in a statement on Thursday. Bharti didn’t provide details on the financial terms of the deal, which is subject to standard regulatory approvals.
“This is Bharti Airtel’s mass-market strategy,” says Jayanth Kolla, a partner at digital technologies and telecom consultancy Convergence Catalyst. “At one shot, Bharti executives are probably counting on denying a mass-market customer base to smaller competitors and slowing down Reliance Jio’s onslaught.”
Billionaire Mukesh Ambani, whose Reliance Industries conglomerate owns Reliance Jio, said this week that the wireless provider has acquired one 100 million customers in 176 days, since launch. Reliance Industries owns Network 18, which publishes Forbes India.
The entry of Reliance Jio last year, with its aggressive promotional offers of free usage is seen to have hurt earnings across the board at competitors, who have then been forced to lower their own rates and offer more competitive data plans. Bharti Airtel’s net profit fell by 55 percent for the quarter ended December 31, 2016, from the year-earlier period, and revenues fell by 3 percent.
“The acquisition of additional spectrum through this transaction, which made an attractive business proposition, has further enhanced our already-solid spectrum portfolio,” Gopal Vittal, managing director and CEO (India and South Asia) of Bharti Airtel, said in the statement.
Britain’s Vodafone Group PLC confirmed on Jan. 30 that it is in talks to merge its Indian unit with Aditya Birla Group's Idea Cellular. Reliance Communications and Malaysia’s Aircel are also in talks to combine their operations in the Indian market.
“The other operators were prepared for a more gradual ramp-up strategy of their own, but now, with Jio, they need to expand more urgently,” Kolla, at Convergence Catalyst, said. Technical aspects such as how much of the new spectrum that Bharti gets will have adjacent bands that can therefore be used much more efficiently and so on remain to seen. “Bharti will certainly develop new data plans to retain the customer base it is acquiring and do everything to hold on to them, as it will give them a degree competitive intensity,” he added.