Is it the end of the road for Loop Mobile?

Loop Mobile, which operates only in the Mumbai telecom circle, is in a tough spot. Its licence expires in 10 months and on Wednesday it said it would not participate in next month’s auctions for more spectrum.

It has also filed a suit with the telecom appellate tribunal for having its licence extended after November this year (the government has said companies wanting extension must bid at the spectrum auctions), adding it should get the right of first refusal for its holding.

Analysts say there is little value in it bidding and winning spectrum. “There is no future for a standalone company. Sooner or later, they will have to go off, so why spend so much money?” says Alok Shende, principal analyst and co-founder of Ascentius Consulting.

A few months earlier, a top Loop executive admitted it had been continuing operations only to sell off later. Loop did generate interest among companies looking to acquire one. It has 3.2 million subscribers and the average revenue a user is Rs 350-400 a month for postpaid ones and Rs 100-120 for the prepaid category. Its earnings are slightly higher than the sector average, indicating a quality subscriber base.

However, with uncertainty on their licence, a deal seems unlikely. “It is likely the company is expecting a potential buyer to acquire spectrum on its behalf,” said an expert who did not want to be named. And, if Loop were to acquire spectrum itself, it would be raising debt, reducing the attraction for a buyer.  Shende says it might not be the end of the road for Loop if it does not participate in the spectrum auctions.

Even if the 900-MHz band spectrum is all auctioned, there would be spectrum in other bands that might be sold later, at prices determined by the February auctions. Loop said it was not relinquishing its right of licence extension. “We believe we have a good case before TDSAT (the appellate tribunal) and are likely to succeed in the matter,” said  Sandip Basu, chief executive.