You are here: Home » Companies » News
Business Standard

Airtel open to acquisition talks with Aircel: Sunil Mittal

Jio's 'long, free promotional period' caused telecom firms to write-off investments worth close to $50 billion, Bharti Airtel Chairman Sunil Mittal alleged

BS Web Team  |  New Delhi 

Sunil Mittal on Jio
Bharti Airtel Chairman Sunil Mittal. Photo: ICC WBO Twitter

With the debt-laden telecom sector still facing the disruption caused by Reliance Jio's entry into the market last year, Chairman has said that his company would be open to a possible acquisition of Aircel. 

In an interview with Economic Times, Mittal spoke on a gamut of topics: From accusing Jio of causing a $50-billion write-off of investments by telcos so far to the likelihood of acquiring Aircel. 

Here are the highlights of Mittal's interview: 

1) Ready to talk to Aircel: Speaking to the financial daily, Mittal said that Airtel was open to acquisition talks with Aircel. He added that Aircel had two option: it could go with the Vodafone-Idea combine or with Airtel. "Whenever there will be a possibility of a conversation, I have no doubt, we will be a part of that conversation," he said. 

As reported in October this year, (RCom) called off its merger with Aircel, owned by Maxis of Malaysia, following legal and regulatory hurdles. 

The move will require Aircel to rework its plan to reduce debt, which was pegged at around Rs 18,000 crore and was partly adjusted after it sold its 2100 MHz spectrum to Airtel for Rs 3,000 crore. Back in October, in an internal email to employees, Aircel Chief Executive Officer Kaizad Heerjee said that the company would work on a revised roadmap that reckons with the difficult market conditions. 

According to an earlier plan, and Aircel were to merge and form an entity called Aircom, with each having 50 per cent. 

Last week, Aircel denied media reports that it was partly shutting down its operations, saying it was making efforts to build a profitable business.

"Media reports about Aircel as regard insolvency or shutting down operations in 14 circles is completely speculative & misleading," Aircel said in a statement.

Earlier this month, ratings agency CARE said that the carrier had delayed servicing its debt obligations.

2) Jio made telcos write off billions of dollars in investments: Jio's "long, free promotional period" caused telecom firms to write-off investments worth close to $50 billion, Mittal alleged while speaking to the financial daily.    

He estimated that between $40 billion to $50 billion had been written off by various telcos, with many of them being international investors. Mittal blamed this write-off "largely" on Jio's pricing and its "long, free promotional period". He added that in his opinion, Jio would not have been allowed to do the same in Europe or the US, adding that "it would have been seen as predatory". 

Further, according to the financial daily, Mittal is of the view that the price war in the sector would take two more quarters to stabilise. 

This is not the first time that Airtel has accused Jio of predatory pricing. However, such accusations are yet to stick. 

In June this year, in a setback for Airtel, fair trade regulator Competition Commission of India (CCI) rejected the case of alleged "predatory pricing" against Jio. According to CCI, just giving access for free itself was not anti-competitive.

As reported earlier, Airtel had filed the case against Mukesh Ambani-owned Reliance Jio, alleging that the latest entrant was indulging in "predatory pricing" with free services to eliminate competition in the telecom market. Airtel had alleged that free services offered by since the commercial launch from September 5, 2016, amounted to predatory pricing. It had also said Reliance Industries had used its financial strength in other markets to enter telecom through Jio.

However, CCI, in its order said that in a competitive market scenario, where there are already big players operating in the market, it would not be "anti-competitive for an entrant to incentivise customers towards its own services by giving attractive offers and schemes". Such short-term business strategy of an entrant to penetrate the market and establish its identity cannot be considered to be anti-competitive in nature and as such cannot be a subject matter of investigation, CCI had said.

During his interview with ET, Mittal also accused Jio of opposing any relief package for the sector. 

3) Relief measures are 'inadequate': Speaking to the financial daily, Mittal also said that he hoped that the Union Cabinet would consider measures such as reducing licence fee and spectrum user charge since those proposed by the for the telecom sector were "inadequate".   

According to Mittal, giving telcos 16 years instead of 10 to pay for the auctioned airwaves without any reduction in interest was an "absolutely inadequate" measure. 

As reported earlier, towards the end of September this year, the Telecom Commission approved the much-awaited extension of deferred spectrum payment liability till 16 years. The panel also approved the shift from pending lending rate (PLR) to marginal cost of funds based lending rate (MCLR) regime for calculation of interest on delayed payment of licence fees and spectrum usage changes plus 400 points. It means the interest rate on delayed payments will come down to 12 per cent. 

Further, while Mittal told ET that Airtel had accepted the Telecom Regulatory Authority of India's (Trai's) proposal to ease the caps on spectrum holdings, he was critical of the regulator's proposal to remove the 50 per cent limit on a telco's holdings within a specific spectrum band. According to Mittal, the latter proposal was "designed to allow more than 10 MHz in 850 MHz" band under one operator.  

As reported last week, Trai has recommended relaxing the rules for spectrum-holding caps, a move that will benefit operators such as Vodafone and to retain their airwaves after the merger and also allow other telcos to get more spectrum in a particular band. Trai has recommended raising the 25 per cent overall spectrum limit to 35 per cent. 

Further, it has proposed removing the 50 per cent intra-band cap. In place of it, the regulator has proposed having a cap of 50 per cent on the combined spectrum holding in the sub-1 GHz bands (700, 800 and 900 MHz).

The relaxation in the 50 per cent cap will let enter into agreements with players such as if it wants to get more spectrum in the 800 MHz band. Market leader has supported increasing the spectrum cap to 33 per cent while advocating retaining the 50 per cent limit whereas is in favour of retaining the 25 per cent cap and removing the 50 per cent limit. 

First Published: Mon, November 27 2017. 13:25 IST
RECOMMENDED FOR YOU