Airtel Loop

India’s largest telecom operator Bharti Airtel is the front runner to acquire Mumbai-based telco Loop Mobile since Loop owners Khaitan group intends to exit the telecom sector, reports The Economic Times, citing multiple sources who are familiar with negotiations.

The report says the deal has been in the works for quite some time but the company is awaiting for clarity on the final guidelines of mergers and acquisitions in the telecom sector and renewal fees, which is expected in the next two months, to close the deal. Both Airtel and Loop Mobile spokesperson have declined to comment on this development to the publication.

This development follows a source-based ET report from October 2012, which had suggested that Loop Mobile was being put up for sale for a reported valuation of $450 million last October and the company was in discussion with Norway’s Telenor, however Loop Mobile had denied this acquisition later. Over the years, Loop Mobile also seems to have had similar discussions with Aircel and Idea Cellular.

Airtel Securing 900MHz Spectrum: If the deal does go through, Airtel will be getting Loop Mobile’s 8MHz spectrum in the 900 MHz band, which is considered to be more efficient than the 1800 MHz band, since it requires lesser number of towers.

However, its worth noting that Loop Mobile’s license is also expiring in September 2014, around the same time when both Vodafone India’s and Airtel’s licenses are also expiring. Loop along with Airtel has filed a case against the government in May 2013, seeking a 10 years extension of its license, since the company believes that it is entitled for a 10 year extension in Mumbai circle as per the license agreement. We couldn’t find any further updates on this case at the time of writing this article.

If Loop Mobile does manage to secure a 10 year extension in Mumbai in the same 900 MHz band, then we feel it would make sense for Airtel to acquire the company, since Airtel currently operates in 1800 MHz band in Mumbai.

What about subscriber base? As per the latest TRAI numbers, Loop Mobile has 2.92 subscribers as of May 2013 and this might propel Airtel, which currently has 3.85 million subscribers, to the top spot in terms of total subscriber base, usurping the position from the current leader Vodafone India which has 6.5 million subscribers in Mumbai.

However, whats worth noting is that only 44.36% of Loop Mobile’s connections are active as of May 2013, which is the second lowest amongst all telcos in Mumbai circle. In comparison, 85.78% of Airtel’s connections are active and 83.99% of Vodafone India’s connections are active as of May 2013.

Also note that Loop Mobile’s sister company Loop Telecom had shut down its operations in May 2012, after its licenses were cancelled by the Supreme Court in February 2012. So this acquisition, is most likely, about spectrum rather than subscribers.