Bharti Airtel, the country's largest telecom operator by revenue and subscriber base, on Tuesday entered into a strategic agreement with Loop Mobile which gives it access to high revenue earning subscribers in the lucrative Mumbai circle.
Under the agreement, Bharti Airtel would not take over the management and employees of the company but only its subscribers and assets such as towers and passive infrastructure.
Though the company did not disclose the value of the deal, sources said it's a Rs 700-crore deal which will see Bharti Airtel paying Rs 300 crore to Loop promoters, the Dubai-based Khaitan family, and take on Rs 400 crore of debt held by the company. The deal has been conducted on a slump sale basis, which means ascribing value on a lump sum basis without assigning value to individual assets and liabilities.
Since Loop Mobile, which had 8 Mhz in 900 Mhz spectrum band and 2 Mhz in 1,800 Mhz band, did not participate in the recently held auctions, its licence would not get renewed in November and the company would cease to provide mobile services. Therefore, the deal does not trigger the merger and acquisition norms of the department of telecommunications and would not require the transfer of licence.
Analysts are divided on the significance of the deal, with some saying it strengthens Bharti Airtel's subscriber base in Mumbai and others saying the company could have acquired the same by porting out the customers through an attractive scheme. Further, some say the integration of the technology and billing system of the two operators would also entail huge costs.
However, purely viewed on the subscriber base, the agreement would take Bharti Airtel to the top spot in Mumbai, with a combined subscriber base of 7.3 million, relegating Vodafone (with 7 million customers at the end of December) to the second spot. However, critics point out that the race for having higher user base made sense in the old days when spectrum was given on subscriber-linked criteria.
Loop offers GSM services in only the Mumbai