Airtel To Defeat Vodafone In Mumbai With Loop Deal

by CXOtoday News Desk    Feb 18, 2014

airtel deal

India’s largest cellular carrier, Bharti Airtel announced its plans to buy Mumbai’s Loop Mobile for about Rs. 3 billion. The purchase would enable Airtel to surpass Mumbai market leader Vodafone by customer numbers, although not by revenue, say telecom experts.

Eyeing the top Slot

Currently, Vodafone is leading with 6.8 million subscribers. With this acquisition, Airtel becomes the top operator with 7 million subscribers. “India is a leading global telecommunications services provider with operations in 20 countries across Asia and Africa, and Loop Mobile today announced a strategic agreement for their operations in Mumbai service area,” Bharti said in its filing.

Under the agreement, Loop Mobile’s 3.2 million subscribers in Mumbai will join Airtel’s over 4.3 million subscribers, creating record number of subscribers in Mumbai and making Airtel the leader in the Mumbai circle.

“For Bharti Airtel, buying Loop Mobile makes a strategic sense. On the subscriber front, Vodafone India is the leader in the Mumbai circle and if Airtel acquires the company, it would become the top company on user count,” Ankita Somani, sector analyst at Angel Broking said in a media report.

Analysts also believe that another benefit for Airtel is the high ARPU customers Loop Mobile has, and importantly a majority of the users are post-paid subscribers. According to industry data, Vodafone’s ARPU for July-September quarter was at 274 and that of Bharti Airtel at 167, while that of Loop Mobile stood about 200.

In a statement Airtel said the proposed transaction will bring together Loop Mobile’s 2G/EDGE enabled network supported by 2,500 plus cell sites, and Airtel’s 2G and 3G network supported by over 4000 cell sites across Mumbai. New customers will get benefits of Airtel’s innovative product portfolio, and access to superior services, innovative products like 3G, 4G, Airtel Money, VAS and domestic/international roaming facilities.

A strategic move

Loop Mobile’s spectrum license in Mumbai circle will expire by September 2014 but that will not affect services due to this deal, sources make it clear. The company did not participate in the spectrum auction that ended on February 13. Meanwhile, the deal would also see Bharti take on Loop’s debt of 4 billion rupees, says a source who declined to be identified.

“Loop was an old player with a base of higher-paying customers in a key market, Mumbai, which is one of the biggest cellphone markets in India. So the deal is attractive for the acquirer,” said Rikesh Parikh, VP for equities at Motilal Oswal Securities told Firstpost.

There have been acquisition talks earlier on Norway’s Telenor and Russia’s Sistema. A year or two ago, Telenor was in talks with Tata Teleservices, while Sistema was linked to Aircel.

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.

In a market like India, where telecom consolidation is marked by challenges such as merger rules, including high price determined at auction, it is indeed a smart move, believe industry experts.