The proposed merger between Reliance Communications and Aircel may have fallen through, but the wave of consolidation in India continues.
The latest development is that Tata Teleservices, which has been exploring ways to leave the over-competitive market, is to sell its consumer business to Bharti Airtel, which is currently India’s largest MNO – but will lose that crown assuming the merger between Vodafone and Idea Cellular goes through.
The Tata/Airtel deal would be the second largest in Indian telecoms this year, after Vodafone/Idea. Airtel has already acquired several smaller operators including Videocon, Tikona and Telenor India. With its Tata acquisition, it will gain 40m subscribers plus access to Tata’s fiber network and some additional spectrum in the 1.8 GHz, 2.1 GHz and 850 MHz bands.
“On completion, the proposed acquisition will undergo seamless integration, both on the customer as well as the network side, and further strengthen our market position in several key circles,” said Sunil Bharti Mittal, Bharti Airtel’s chairman, in a statement. “The acquisition of additional spectrum made an attractive business proposition. It will further strengthen our already solid portfolio and create substantial long term value for our shareholders given the significant synergies.”
Tata has debts which have mounted to about INR340bn ($5.2bn) and it was previously in talks with Vodafone India about a possible acquisition. Tata Sons, its parent company, will take on those debts and other liabilities, with Airtel only having to inherit a small portion of Tata’s unpaid spectrum fees. But media reports indicate the merger could cost 5,000 jobs as Airtel looks for synergies.
The surge of M&A deals has been provoked partly by the disruptive market entry of Reliance Jio, the new low cost operator which has sparked price wars – the last thing operators in the already ultra-low ARPU country needed to make sense of their 4G deployments. But its dramatic entry has not come easily to Jio and its parent, Reliance Industries, either.
The company reported its financial results for the first time last week, posting about $950m in revenue, on total spending of $1.01bn, making a loss of about $63m during a period when it added over 15m subscribers.