Proxy firms divided on Airtel-Telenor deal

Amid concerns by few shareholders and creditors over Bharti Airtel's deal with Telenor India, the shareholder voting concluded on Tuesday as directed by National Company Law Tribunal (NCLT).

The meeting for equity shareholders and unsecured creditors of Bharti Airtel was convened to approve the scheme of amalgamation between Telenor India Communications and Bharti Airtel and their respective shareholders and creditors, Airtel said in a communication to stock exchanges.

The voting was completed on Tuesday and the results will be subsequently disseminated within the stipulated time, Airtel said.

One of the proxy advisory firm Institutional Investor Advisory Services (IiAS) has supported the merger between Bharti Airtel and Telenor India. In a report to the shareholders, it said the diligence done by the audit firms were adequate and the merger was beneficial to Bharti as it adds crucial spectrum and subscribers to Airtel.

However, another proxy advisory firm Stakeholders Empowerment Services (SES) has advised Bharti Airtel's shareholders to reject the company's proposal to acquire Telenor India. In a report, it said the accounting standards of the two companies were conflicting and as per rules under the Companies Act, Bharti must revise and audit the accounts based on its own standards once the acquisition was closed. The different accounting standards could lead to a write-off by Bharti.

In February this year, Airtel announced acquiring operations of Telenor India in seven telecom service areas – Andhra Pradesh, Bihar, Maharashtra, Gujarat, eastern and western Uttar Pradesh, and Assam.

Bharti Airtel – will take over Telenor's outstanding spectrum payments and other operational contracts, including tower lease. The deal won't involve any cash ouflow but spectrum deferred payments to be around Rs 1,600 crore will be taken over by Airtel. Both the companies that time said the deal is likely to be completed in 12 months.

It is learnt that Airtel will take on future liabilities including around Rs 1,600 crore of spectrum repayment and Rs 4,000 crore lease obligations. Some creditors have expressed concerns over the liabilities that will come after the deal is concluded and at a time when telecom sector is going through a stressed financial time.

The deal came after telecom industry starting witnessing consolidation post the entry of new player Reliance Jio in the sector, which has impacted the financials of the incumbents and increased the level of competition multifold.

For Telenor, the deal will help in exiting Indian telecom market. It entered India in 2008 in a tie-up with real estate firm Unitech. The Telenor-Unitech joint venture started services in a few areas in December 2009, but received a jolt in February 2012 when India's Supreme Court cancelled its licences along with those of many other companies after ruling that the permits were granted illegally. Telenor subsequently bought out Unitech and won licences for seven telecom areas and has been a regional player.