Bharti Airtel gets Tikona's wireless spectrum in Rs 1,600 crore all-cash deal

Image: Adnan Abidi / Reuters

Bharti Airtel Ltd., has agreed to acquire Tikona Digital Networks’ 4G business that gives it additional spectrum in five telecom circles as the country’s current No. 1 wireless provider prepares to compete against Reliance Jio Infocomm’s 4G services.

The Rs. 1,600 crore all-cash deal gives Bharti Tikona’s 20MHz of broadband wireless access spectrum in the 2300MHz band. This takes Bharti’s total to 30MHz of capacity in that band across 13 telecom circles. The acquisition gives it “a tremendous advantage to cater to the surging data demand,” the company said in a filing on Thursday after close of Mumbai trading.

The rapid customer uptake at Reliance Jio, the wireless unit of the Reliance Industries Ltd. conglomerate, since its launch late last year, has pushed rivals including Bharti, Vodafone India Ltd. and Idea Cellular Ltd. to accelerate their plans to consolidate. Vodafone India and Idea have just announced a $23 billion deal to merge, which would form the country’s biggest wireless provider with a 35 percent market share.

“We expect capex (on 3G/4G rollouts) to remain elevated, with operators increasing data capacity over FY17-FY19 to offer high data bundled plans, thus keeping their free cash flows under pressure,” says a Morgan Stanley research report dated March 22. “Net-debt-to-EBITDA is also likely to remain high as profitability comes under pressure during this transitional period.”

In 2016, Vodafone India snapped up Mumbai-based internet service provider You Broadband. The rationale behind the deal was to leverage You Broadband’s 3,000 km of optical fiber cables and 6,000 km of last mile cables, across 12 cities.

While incumbent telcos have established their operations on the basis of telecom towers and cell sites, they lag Reliance Jio Infocomm when it comes to the optical fiber cable network that the latter has laid on the ground.

Bharti has already agreed to acquire Scandinavian operator Telenor’s Indian business, which takes its share to around 28 percent. Among the circles in which Bharti will boost its spectrum are Rajasthan, Uttar Pradesh West and East, Himachal Pradesh and Gujarat.

Tikona also has a wireless broadband service, which is excluded in the deal with Bharti, and its shareholders will continue to own it, according to the filing. The deal is subject to regulatory approvals and Bharti and Tikona expect to conclude it within 60 days. Bharti expects to start immediately rolling out 4G services on the newly acquired spectrum in the five circles, the company said in a press release.

(Reliance Jio Infocomm is owned by Reliance Industries, which also owns Network 18, publisher of Forbes India)