Marking the first post-auction acquisition, Bharti Airtel on Tuesday proposed to buy the services of Loop Mobile in the Mumbai service area.
Under the agreement, Loop Mobile's 3 million subscribers in Mumbai will join Airtel's over 4 million subscribers, "creating an unmatched mobile network" in Mumbai, Airtel said. The deal makes Airtel the country's largest service provider by subscribers, ahead of Vodafone which has 6.8 million subscribers.
The proposed transaction will bring together Loop Mobile's 2G enabled network supported by 2,500-plus cell sites, and Airtel's 2G and 3G networks supported by over 4,000 cell sites across Mumbai. It will also offer subscribers the widest exclusive retail reach with 220 outlets.
The companies did not disclose the size of the deal but industry sources speculated it could be for about Rs 700 crore. Loop, 99% owned by the Dubai-based Khaitan family, has a debt of around Rs 400 crore.
Loop Mobile subscribers will become part of Airtel's global network that serves over 289 million customers in 20 countries. Globally, Airtel is ranked the fourth largest mobile services provider in terms of subscribers.
Loop has services in only the Mumbai circle and boasts a blended average revenue per user (Arpu) of over Rs 225, much higher than the industry average of Rs 100 and Airtel's Arpu of Rs 195. Loop's portfolio includes post-paid subscribers in an industry which has over 90% of prepaid subscribers, potentially making it a value deal for Airtel.
Loop's licence comes up for renewal in November 2014. However, the company did not participate in the just-concluded spectrum auctions. Airtel, however, bought a part of that spectrum at the auctions.
The Airtel-Loop tie is the first deal post the government's finalisation of the mergers and acquisitions (M&A) policy earlier this year. The policy, however, is yet to be notified.
Analysts said the deal may not trigger an M&A wave in the industry in the months to come. "For Bharti, it turns out to be an attractive opportunistic transaction. The company wanted to become the No.1 service provider in Mumbai. Loop was a relatively clean company compared to some players, so it turned out to be a digestible deal," said an analyst. "Consolidation will happen but it will depend on the market requirement. Probably just a couple of more (such deals are possible) in the near future."