Norway’s Telenor is reportedly close to reaching a deal to buy Indian telco Videocon Telecom’s 4G spectrum in two service areas. The deal would come hot on the heels of Videcon’s agreement to sell 4G airwaves to Idea Cellular for US$499m.
Norway’s Telenor (OSE:TEL) is reportedly close to reaching a deal to buy Indian telco Videocon Telecom’s 4G spectrum in two service areas.
The deal is valued at about Rs35bn (US$524m) and could be announced shortly, the Economic Times cited people aware of the matter saying, adding that Telenor is keen to launch 4G services to better compete with rivals. Telenor, whose local unit is India’s eight-largest cellco with about 46 million customers, would gain the rights to airwaves in Uttar Pradesh (East) and Bihar.
In an earlier interview with the paper, Arvind Bali, CEO of Videocon Telecom, a unit of Videocon Industries (NSE:VIDEOIND), said a “leading foreign telecom carrier’ was the prime contender for the 1,800 MHz spectrum in the two service areas, indicating that it would either be Telenor or Vodafone. He said the company wanted Rs35bn-Rs40bn (US$524m-US$599m) for the spectrum, adding the price would be the deciding factor for any deal.
Telenor, which operates in six service areas and is a minnow compared with the three largest cellcos – Bharti Airtel, Vodafone and Idea Cellular – has declined to comment on the matter.
The news comes just days after Videocon agreed to sell 4G spectrum to Idea, a unit of conglomerate Aditya Birla, in two service areas for Rs33.10bn (US$499m). Idea will obtain the right to use contiguous spectrum blocks in the 1,800 MHz band in Gujarat and Uttar Pradesh (West) until December 2023.
The government approved spectrum trading between telcos in early September and Videocon wasted no time in declaring that it intended to take advantage of the new guidelines.
Indian telcos are eager to develop 4G services ahead of the likely spring 2016 commercial launch of billionaire Mukesh Ambani’s 4G upstart Reliance Jio. Market leader Bharti Airtel already offers 4G services in several areas, while number two player Vodafone plans to launch 4G in December.
Many predict the already competitive local mobile sector will heat up further following Jio’s launch, with some analysts speculating that smaller players will eventually be forced out. Last week, Fitch Ratings said it expects Jio’s entry to put pressure on the credit profiles of the top four telcos. The agency predicts that their average operating EBITDA margin will narrow by 100bps-200bps due to pricing pressure on higher margin data services and a rise in marketing spend as data competition increases. Fitch expects only five or six operators will survive long-term, with the top four increasing their market share. It expects unprofitable players such as Videocon, Aircel and Tata to exit.
Telenor India posted revenues of NOK1.4bn (US$161.3m) for Q3 2015, up from NOK1bn (US$115m) for Q2 2014. The unit added one million subscribers during the third quarter of this year.
