Telenor’s Indian unit is reportedly in talks to acquire smaller rival Videocon Telecom, a move that would push its mobile market share above 5%.
The Norwegian firm’s Uninor business is conducting negotiations to take a majority stake in its smaller rival, but have yet to reach agreement on a valuation, the Economic Times reported on Thursday, citing unnamed sources.
Videocon values itself at around 100 billion rupees (€1.37 billion) including debt, one of the paper’s sources said.
Videocon’s CEO Arvind Bali confirmed his company is in discussions with international companies regarding a stake sale, but did not comment further, the paper said. There has been no comment from Uninor.
Merging with Videocon would help Uninor to boost its market share, although the combined company would remain India’s eighth largest mobile operator.
Uninor had 45.2 million customers as of the end of February, which translated to a market share of 4.7%, according to the latest figures from the Telecom Regulatory Authority of India (TRAI), while Videocon’s 6.9 million customers gave it a share of below 1%.
By absorbing Videocon Uninor would increase its share of the market to 5.4%, enabling it to mount a stronger challenge to seventh placed Tata DoCoMo, which had a 6.9% share at the same date.
There has also been talk of a tie-up between Uninor and Tata DoCoMo in recent months.
The operator is in a state of flux, with Japan’s NTT DoCoMo in the process of selling its 26.5% stake and the Tatas reportedly keen to exit the telecoms space.
As it stands, the pair are involved in arbitration over the valuation of DoCoMo’s stake. That process could last for years, according to a separate Economic Times piece that quoted a spokesman for the Japa nese firm.
In the meantime, it is still possible that a buyer could come forward for the whole business.
Indeed, Tata’s participation in India’s recent spectrum auction, in which it spent 78.5 billion rupees (around €1 billion) to acquire 800-MHz and 1800-MHz airwaves, has been interpreted by various industry watchers as an attempt to beef up the value of the company ahead of a sale.
In March the Business Standard suggested that Tata and Telenor, which incidentally did not win any spectrum in March’s auction, are waiting for the government to clarify its M&A policy before making a move.
M&A rules do not present a challenge to a tie-up between Uninor and Videocon, since both operators are quite small and hold liberalised spectrum, the Economic Times noted on Thursday.
However, Videocon owes the government 5 billion rupees (€68 million) for use of mobile spectrum following the cancellation of its 2G licence in early 2012. Those arrears could prove a stumbling block in any takeover deal, the paper’s source said.
The state billed all the operators affected by the licence cancellations and they are all arguing their case with the Department of Telecommunications (DoT), the paper added.
