Reliance Jio effect: Bharti Airtel to buy Telenor India; all you need to know in a nutshell

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    The acquisition will add about 44 million subscribers to Bharti Airtel’s existing 266 million, taking the total to 310 million. It will still be behind the possible Vodafone-Idea combine, which will have 390 million users. (Image: Reuters)

    In further consolidation in the Indian telecom sector post the entry of Reliance Jio with its free voice and data services, Bharti Airtel said on Thursday that it will acquire rival Telenor India to further augment its customer base and network.

    As part of the agreement, Airtel – India’s largest telecom service provider – will acquire Telenor India’s operations in seven circles, namely Andhra Pradesh, Bihar, Maharashtra, Gujarat, UP (East), UP (West) and Assam, it said. “These circles represent a high population concentration and therefore offer a high potential for growth,” Airtel added.

    Bharti Airtel stock surged on the news to 10.9% at the day’s high of Rs 400.65, hitting its highest in 18 months. It was trading up 8% at Rs 389.9.

    New customers, spectrum

    Notably, its other biggest rivals Vodafone India and Idea Cellular are very close to merging their business operations, an announcement for which is expected later this week.

    The acquisition will add about 44 million subscribers to Bharti Airtel’s existing 266 million, taking the total to 310 million. It will still be behind the possible Vodafone-Idea combine, which will have 390 million users.

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    The acquisition will also give Airtel another 43.4 MHz spectrum in the 1800 MHz band. “The acquisition of additional spectrum through this transaction, which made an attractive business proposition, has further enhanced our already solid spectrum portfolio. The proposed transaction will also create substantial long term value for our shareholders given the significant synergies,” Gopal Vittal, Managing Director and CEO (India and South Asia), Bharti Airtel, said.

    Consolidation moves

    Reliance Jio’s entry into the telecom space has forced the incumbent players to drastically cut tariffs – as much as by 66% – in order to retain their customer base, and has put the entire sector under tremendous pressure of choosing between protecting margins and user base.

    Reliance Jio had extended its inaugural free voice and data plan till March 31 drawing complaints and criticisms from its biggest rivals Airtel, Vodafone and Idea, who assert that its anti-competitive practices and freebies are hurting the industry.

    The developments have forced the smaller players with weaker balance sheets to consider amalgamating with other larger ones in view their business operations fast becoming unviable.

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    “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, Chief Executive Officer of Telenor Group, said.

    Reliance Industries, India’s largest business conglomerate, launched its much awaited telecommunication venture Reliance Jio Infocomm last year with a whopping Rs 1.5 trillion investments to start with, mainly in building high-speed internet infrastructure over the new 4G/LTE network across the entire country. It topped it up with an announcement of a further investment of Rs 30,000 crore in December.

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