Telenor officially quit the Indian telecoms market Thursday after striking a definitive agreement with Bharti Airtel under which Airtel will take full ownership of Telenor India without paying a dime.
Airtel – which is already India’s largest wireless operator with over 269 million subscribers and a revenue market share of over 33% – will take over Telenor India’s spectrum, licenses and operations, including its employees and customer base of 44 million. Telenor India currently serves six telecom circles – Andhra Pradesh, Bihar & Jharkhand, Gujarat, Maharashtra, UP East and UP West – and also has spectrum in Assam.
Telenor’s operations and services will continue as normal until the completion of the transaction.
According to the agreement, Airtel will take over Telenor India as soon as all necessary approvals are received. Airtel will also take over outstanding spectrum payments and other operational contracts, including tower leases.
Telenor first entered the Indian market in 2008 as Uninor via a partnership with real estate firm Unitech, but has found it hard going. The operator lost its spectrum licenses in 2012 due to a government scandal involving 2G licenses. Telenor eventually bought the spectrum back, ditched Unitech and took over the operation in 2014 as Telenor India, but heavy competition and price wars took their toll.
When Reliance Jio arrived last year to turn up the heat further with free service plans, the Indian mobile market quickly became ripe for consolidation. Indeed, the Airtel-Telenor deal is just the latest of several reported merger deals and proposals in recent months.
The deal will bring Airtel’s subscriber base to over 300 million. However, even with that, it still stands to lose its market leadership if Vodafone India and Idea Cellular go through with a proposed merger that would create a combined customer base of around 395 million and a revenue market share of around 40%.
Telenor Group CEO Sigve Brekke said the deal was in the best interest of its customers, employees and the group in general.
“Finding a long term solution to our India business has been a priority for us, and we are pleased with our agreement with Airtel,” Brekke said in a statement. “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 would not have given an acceptable level of return.”
Gopal Vittal, Managing Director and CEO (India and South Asia) for Bharti Airtel, said the deal will beef up Airtel’s spectrum portfolio spread across multiple 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 considerably in several key circles,” Vittal said.
Telenor said the transaction won’t trigger any impairment. As of the fourth quarter 2016, the remaining value of tangible and intangible assets in Telenor India amounted to NOK 0.3 billion (around $36 million).
The transaction is subject to requisite regulatory approvals, including approvals from the Department of Telecommunications in India (DoT) and the Competition Commission of India. The exposure to claims related to the period Telenor owned the business, will remain with Telenor.
The transaction is expected to close within 12 months. With effect from the first quarter of 2017, Telenor India will be treated as an asset held for sale and discontinued operations in Telenor Group’s financial reporting.