Mumbai: India’s largest cellular carrier, Bharti Airtel Ltd, will buy small mobile operator Loop Mobile for about Rs.300 crore, two sources said, the first merger in six years in an industry long seen as ripe for consolidation.
Loop, which operates only in Mumbai with about 3 million subscribers, was up for grabs as a potential acquisition as its spectrum licence lapses on 28 November.
A purchase would enable Bharti to surpass Mumbai market leaderVodafone India Ltd by customer numbers, although not by revenue. Mumbai is one of the biggest cellphone markets in India.
The deal, which would also see Bharti take on Loop’s debt of Rs.400 crore, could be announced this week, said the sources, who have direct knowledge of the matter. They declined to be identified because the talks are not yet public. Bharti and Loop declined to comment.
“Loop was an old player with a base of higher-paying customers in a key market, so the deal is attractive for the acquirer,” said Rikesh Parikh, vice president for equities at Motilal Oswal Securities Ltd.
Industry consolidation has been slow to take place in the world’s second-largest cellular market due to challenging merger rules, including a new requirement that the buyer pay separately for the target company’s airwaves based on prices determined at an auction.
Norway’s Telenor ASA and Russia’s Sistema have also been seen as potential acquirers in India. Both had to scale back their Indian operations because of a court order revoking all permits awarded in a scandal-tainted 2008 government process.
Sources said in 2012 that Telenor was in talks with Tata Teleservices, while media reports have linked Sistema to Aircel, the sixth-biggest carrier.
Parikh at Motilal Oswal Securities said similar deals to Loop were unlikely as there aren’t too many other small players with sufficient spectrum or an attractive customer base. Loop Telecom, an associate company of Loop Mobile, lost its permits in 21 of India’s 22 telecoms service areas after the Supreme Court order on the 2008 wireless permits. Loop has denied any wrongdoing.
