Retaining Telenor's customers could be challenging for Airtel post buyout

Proposed buyout deal a step towards consolidation in face of Reliance Jio's entry into the sector

Bharti Airtel’s proposed buyout of Telenor is a step towards consolidation in the telecom sector, which is currently grappling with Reliance Jio — the newest rival on the block.

According to analysts, both Bharti Airtel, which is the country’s largest telecom company, and Telenor will benefit from the deal.

Telenor is a marginal player in the sector and cannot sustain competition from the likes of Reliance Jio. While for Airtel, buying Telenor at about Rs 420-423 per subscriber is a good consideration, a Mumbai-based fundamental analyst said.

However, retaining Telenor India’s subscribers in today’s environment in the telecom industry can pose a challenge for Airtel.

According to some media reports, Bharti Airtel is in advanced talks to buy Telenor India’s business, including the latter’s Rs 1,500-crore debt. At present, Airtel’s consolidated net debt stands at Rs 83,000 crore.

In its report in October, Moody's Investors Service had said that Airtel's debt would increase by $2 billion (over Rs 13,300 crore) in the next 6-12 months on spectrum purchase.

Experts feel that there may be a churn in subscribers in the Uttar Pradesh and Bihar circles of Telenor as the users in those circles are price elastic and might even shift to a service provider offering cheaper services.

Currently, Telenor is present in six of the total 22 telecom circles in the country and offers 2G services to its 45 million users.

The Norwegian company, which posted an operating loss of Rs 3,226.31 crore in the third quarter ended September 30, 2016, had hinted at an exit from India on account of higher spectrum cost.

Analysts also indicated that the 10-15 per cent fall in tariffs of telecom service providers in the October-December quarter of the current financial year will dent revenues during the period.

Reliance Jio, which boasts of a subscriber base of over 50 million in the first three months of its 4G launch, announced the extension of free domestic voice calls and data till March 31, 2017, in its 'Happy New Year Plan'. Even after March, the company would offer free calls for life to its 4G customers.