Telecom player Bharti Airtel Ltd and Hughes Communications India Ltd. (HCIL), a subsidiary of satellite network provider Hughes Network Systems, LLC, have agreed to merge their Very Small Aperture Terminal (VSAT or broadband satellite) operations in India, the firms said.
VSAT stands for very small aperture terminal. VSATs use geosynchronous orbit satellites to communicate with other terminals around the world and can be used to provide services such as high-speed internet and video-conferencing services.
Hughes will have a majority ownership in the combined entity and Airtel will have a significant minority shareholding.
The transaction is subject to approvals.
Both firms said that the combined entity will benefit from enhanced scale, improved operational efficiencies and wider market reach.
“These are exciting times for satellite broadband service providers as VSAT becomes more mainstream, driven by growing demand from both enterprise and government segments,” Partho Banerjee, president and managing director, Hughes Communications India Ltd, said.
While data consumption has generally increased over the years, telecom companies have struggled to protect their margins because of the price war fare unleashed by the latest entry of Reliance Jio.
This has forced operators to look at consolidating various businesses and cutting back on existing debt. Last year, Airtel sold a stake in its direct-to-home television arm to private equity firm Warburg Pincus.
Yesterday, Airtel surprised analysts with its March quarter profit.
The company is considering a Rs 25,000 rights issue and has appointed Axis Capital, JPMorgan, Goldman Sachs, HSBC Securities and Capital Markets, and ICICI Securities as book-running managers. The issue is expected to open to subscribers later this month.
In March 2019, Singapore sovereign wealth fund GIC agreed to invest $714 million in Airtel.
Also, Airtel and the Vodafone Group are in discussions with a consortium led by private equity firm KKR to sell over half their stakes in the to-be-merged entity of telecom tower firms Bharti Infratel and Indus Towers, The Economic Times had reported this month, citing people in the know.