Bharti Airtel to acquire Tikona Digital’s 4G biz for $244 mn
Photo Credit: Mukul mudgal/VCCircle

Bharti Airtel Ltd has agreed to acquire the fourth-generation telecom business and airwaves of Tikona Digital Networks Pvt. Ltd for about Rs 1,600 crore ($244 million) in cash and debt, as it continues to strike deals to strengthen its position in the wake of growing competition.

The billionaire Sunil Bharti Mittal-led company is currently India’s largest telecom operator but it will drop to the No.2 position after Vodafone India Ltd and Idea Cellular Ltd—the second- and third-largest players—agreed to merge earlier this month. The developments come after India’s richest man, Mukesh Ambani, launched Reliance Jio Infocomm Ltd late last year and threw India’s telecom industry into a turmoil.

The Tikona deal comes exactly a month after Bharti agreed to acquire the India business of Norwegian telecom operator Telenor ASA.

Bharti said in a statement on Thursday that it will acquire Tikona’s wireless broadband business in four telecom service areas—Gujarat, eastern and western Uttar Pradesh, Himachal Pradesh—and that unit Bharti Hexacom Ltd will buy Tikona’s operations in Rajasthan.

The deal will enable Bharti to fill gaps in the 2300 MHz band of wireless broadband spectrum in the five circles, thereby securing a pan-India footprint in the band. It will help the company handle surging demand for data services and to roll out high-speed 4G services on the new spectrum in the five circles, Bharti said.

Gopal Vittal, managing director and CEO for India and South Asia at Bharti Airtel, said that the deal will complement the company’s continued focus on strengthening its 4G capabilities across multiple spectrum bands and bolster its network.

Bharti Airtel operates in 17 countries across Asia and Africa. In India, its product offerings include mobile-phone services, mobile commerce, fixed-line services, broadband and direct-to-home television. It had 368 million customers across its operations at the end of January. These include about 269 wireless subscribers; the Telenor deal will add 44 million users.

Jio’s threat

Reliance Jio has thrown India’s telecom industry into a price war after its launch in September last year. The company initially offered its services for free and has already added 100 million users; it will start charging for its data services from next month but at highly discounted prices.

This has hurt profit margins and market share of Bharti Airtel, Vodafone and Idea. Bharti, for instance, reported a 54% drop in consolidated net profit for the quarter through December. Idea Cellular, part of the billionaire Kumar Mangalam Birla’s diversified Aditya Birla Group, reported its first quarterly loss ever for the October-December period of 2016.

While the merger of Vodafone and Idea will create India’s largest telecom operator with about 400 million users, Bharti has been acquiring smaller rivals and spectrum over the past couple of years. Last year, it had signed a spectrum trading deal with Aircel Ltd worth Rs 3,500 crore and a similar pact valued at Rs 4,428 crore with Videocon Telecommunications Ltd.

Tikona's investors

In its last fundraise, Tikona had raised $45 million in a round led by the World Bank arm International Finance Corporation (IFC) with participation of existing investors two years ago.

IFC had brought in $25 million while the rest was invested by Goldman Sachs Asset Management, Oak Investment partners, Everstone Capital and L&T Infrastructure Finance Co Ltd collectively.

Founded by a team of telecom professionals led by chief executive Prakash Bajpai in 2008, Tikona had raised Rs 237.26 crore from private investors in 2009.

Tags: Bharti Airtel Ltd, Tikona Digital Networks Pvt. Ltd, Reliance Jio Infocomm Ltd, Idea Cellular Ltd, Vodafone Group Plc, telecom, broadband, wireless, 4G, data

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