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Loop acquisition is a win-win deal for Airtel

3 mn subscriber base in mumbai to help Bharti to recover its cost of acquiring fresh spectrum in the recent auction

Shishir Asthana  |  Mumbai 

added around 3 million new subscribers to its existing base of 269 million subscriber through the acquisition of The acquisition will add around Rs 600 crore to Bharti's existing turnover of over Rs 80,000 crore. As it is apparent, the acquisition is no big deal in terms of money spent on the deal.

Cost of acquisition is being speculated at Rs 700 crore which includes repayment of debt worth Rs 400 crore. For with a balance sheet size of Rs 127,371 crore, the investment required for the acquisition (Rs 700 crore) is not meaningful for analysts to change their recommendation because of this deal.

ALSO READ: Bharti Airtel acquires Loop Mobile for Rs 700 cr

However, there are a number of positives for Bharti on account of this deal. First, the company acquires 3 million subscribers in the biggest mobile market in the country-Mumbai. With this acquisition, Airtel becomes the largest player in the city in terms of subscribers. Along with the clients, Airtel will also gets access to 2500 cell sites out of which 400 towers are owned by Since Bharti already has 4000 cell sites, there can be some consolidation and cost cutting on account of this deal.

Reports say that Bharti might not take employees of Loop on its board, which essentially means that the Rs 700 crore paid by Airtel for acquiring 3 million subscribers has come at a cost of nearly Rs 2333 per subscriber. Adding the cell sites which come with the company, Bharti seems to have struck a good deal. But then Loop's license was expiring in September 2014, which would have resulted in other mobile operators poaching Loop's subscriber base.

Also for Bharti Airtel, which has recently won 5MHz in the 900 MHz band in mumbai, new clients would help in recovering its cost faster.

But what's in it for Loop promoters, the family who take away only Rs 300 crore from the deal (net of debt of Rs 400 crore) from an investment of around Rs 700 crore in acquiring 98 per cent stake in the Loop Telecom.

For them, it is an end of a bad investment. Their journey started on a high note but after its name came up in the 2G scam and the asked the company to surrender 21 of the 22 circles, there was little reason for the company to continue in the business. Their investment in the 21 circles was lost after the Attorney General and telecom minister said that no money would be refunded.

More than the money invested in Loop Telecom, the Khaitans are hoping to make more money through an arbitration case which they have filed against the government of India. Holding has claimed damages worth $1.5 billion (around Rs 9,300 crore) for the losses it faced subsequent to Supreme Court's order of cancelling the case.

First Published: Tue, February 18 2014. 16:21 IST