Telenor mulls merger with Aircel, RCom in India
Merger seems to be in the air these days with leading telecom companies discussing merger in order to cope with growing competition in the market. Of course, with Reliance jio giving free internet services extension up to end of March 2017, the other players in telecom sector needed to think of a strategy and Vodafone merger talks with Idea was an example. As per latest reports from Economic Times (ET), Telenor wants to combine its business, customer base and spectrum with the Aircel-RCom entity agreeing to a 10 per cent share in the merged business while the remaining 90 per cent would equally shared between Aircel’s owner Maxis Communications and RCom.
As we know, Telenor is headquartered at Oslo, Norway and its Indian arm is operating in India as Uninor. However, Telenor owns 100% of the stake in the holding company, Telenor India Communications Pvt Ltd. The success of Uninor was proved with being launched in eight telecom circles on 3 December 2009, after completing one of the world’s largest GSM Greenfield launches which was also one of the fastest telecom roll-outs ever in India. The 4 G services were launched in Varanasi and the company deployed narrow-band LTE on 1800 MHz spectrum. The network is the world's first commercial lean GSM network. Lean GSM is a technology developed by Hawaii that compresses data to improve the efficiency of spectrum. Telenor reframed 1.4 MHz of its 2G voice spectrum for data, maintaining the same voice quality while utilizing less spectrum.
Why Telenor is eyeing merger ?
The latest news in town is about Telenor deciding to merge in a three way union with Rcom and Aircel and that too with 10 % shares only. Although currently only discussions are taking place, if the merger becomes a reality then Aircel’s promoter Maxis Communication Bhd and RCom will get 45 percent each in the venture. The fierce competition in the telecom market has led to Telenor think of merger as an option to stay in the Indian market rather than moving away from the scene completely. There were good results for Telenor group in third quarter if 2016 reaching it’s highest Income before Interest, Taxes, Depreciation and Amortization but as per reports, Telenor India lost 689,000 mobile subscribers during the quarter ended December 31 2016 (Q4 2016), higher than the 185,000 subscribers that it lost in the previous quarter. The main reason for the loss is seen as Reliance Jio while other leading players like Airtel, Vodafone and India are posing serious competition to Telenor India.
At a time when, Vodafone India, Idea and Bharti Airtel have felt the heat by the entry of newcomer Reliance Jio, offering free voice and low cost data to the Indian market, Experts find Telenor as a small fish in this sea, with around 5 per cent market share, but a plus point is that it owns spectrum which can be used for 4G.
Bharti Airtel also interested in Telenor
While everyone is thinking of new ideas to stay put in the Indian telecom market, we had reports of Airtel also being interested in acquiring the Indian arm of Telenor. As the operator (Uninor) has a marginally a subscriber base of 53 million active customers, the move is reality would be considered a great deal for Airtel which has an already huge customer base because of it’s excellent network coverage including remote areas.
Telecom Merger with Aircel and Rcom at mercy of Supreme Court Order
As per reports from ET, discussions between the three companies started in late December 2016 but have been pending because of Supreme Court Case Aircel’s Indian operations. As per the court order, “All earnings of Aircel shall be restrained and that the prohibition shall become enforceable if Maxis, Krishnan and one of its directors, Augustus Ralph Marshall, fail to accept court summons and show up. The bench also stayed “selling and trading in the 2G spectrum under consideration”. Hence, this is an order which is likely to affect India’s biggest consolidation deal in the telecom sector.
An unnamed executive told the ET discussions between Telenor, Aircel and RCom began in late December, but have been delayed by a Supreme Court case covering Aircel’s Indian operations. The executive said “there will be clarity” on the case by the end of this week, noting the court’s decision could ultimately lead to the collapse of a broader merger involving Aircel and RCom if it goes against Aircel.
Earlier this month, the Supreme Court said it would cancel Aircel’s 2G spectrum licence if the owner of parent Maxis Group, Ananda Krishnan, continued to evade appearing before Indian courts, giving him a 27 January deadline.The case centres on how his company acquired a 74 per cent stake in Aircel.Meanwhile, Vodafone Group confirmed it is in talks to merge its Indian business with rival Idea Cellular in a deal which could create a new market leader.
The growing competition in the Indian telecom industry is apparently on its way to claim its second casualty after Vodafone-Idea merger. Consolidation between operators is the latest fad in the industry owing to the disruptive launch of Reliance Jio. The latest operator to head the Vodafone way is Norway’s Telenor, which operates in India under the name Uninor. According to reports, the company has reportedly approached Aircel and Reliance Communication to explore a merger possibility through share swap. At the fringes of the industry, the operator has a subscriber base of 53 million active customers.
If the merger is completed, Telenor will own 10 percent in the three-way alliance. Aircel’s promoter Maxis Communication Bhd and RCom will get 45 percent each in the venture. “Discussions among the three had started around last Christmas but it has been in a limbo for the past few weeks due to the Supreme Court shadow over Aircel’s local operations. By the end of this week, there will be clarity on that front. If the court decides to quash Aircel’s licence, then even the bigger Aircel-RCom merger will collapse,” ET quotes an executive aware of the ongoing discussions in its report.
Earlier this month, the Supreme Court said that it would revoke Aircel’s licence if its promoter Ananda Krishnan didn’t appear in a lower court in an ongoing case of corruption. The court also barred the sale or transfer of the 2G airwaves to a third party. Last year, Aircel merged with Reliance Communications under what is considered to be the biggest consolidation in the telecom space of India. RCom had announced Rs 65,000 crore merger of its wireless business with Aircel last September, creating the country’s fourth-largest phone company in terms of customers and revenue. In late 2016, the alliance merged itself with Reliance Jio.
Aircel-RCom is not the only alliance Telenor is eyeing to stay put in India against a complete exit. Earlier this month, Bharti Airtel announced that it was in talks to buy out Telenor’s India arm – Uninor.
If the merger is complete with Aircel-RCom, Telenor, which brands itself as the cheapest provider of voice and data services, will add additional subscribers and additional 4G LTE spectrum. The spectrum it owns can be used for offering 4G services in the 1800 MHz band in seven circles. Additionally, Telenor offers 2G services in six circles and 4G services in 27 towns across the 6 circles. The company further plans to expand its 4G services to 10 more Indian cities. However, Telenor has already marked down its India investments by Rs 5,000 crore since the beginning of 2016, and given the recent launch of affordable Reliance Jio 4G services, the future appears uncertain for operators like Telenor in the price war.