Airtel Calls Off Loop Mobile Deal After The Non-approval of DoT

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Airtel Calls Off Loop Mobile Deal

India’s leading presence in the telecom sector- Bharti Airtel had planned to buy the crises hit Loop Mobile in February to strengthen its position in the lucrative Mumbai circle, where their fierce rival Vodafone India Ltd has the largest number of mobile phone users.

The Telecom Regulatory Authority of India (TRAI) had objected to the migration of Loop’s subscribers to Airtel on grounds that the compulsory transfer of customers will break the rules on mobile number portability which otherwise advocate voluntary migration. Whereas the Department of Telecom stated that the nature of Bharti Airtel’s acquisition- a slump sale, is not a part of India’s telecom policy

Bharti Airtel stated that the agreement with Loop was subject to approvals from the Department of Telecommunications and the Telecom Regulatory Authority of India. In light of the fact that such approvals had not been received and the fact that Loop’s mobile license is to expire at the end of November 2014, Bharti Airtel has decided to terminate the discussions with regard to the transaction for acquiring subscribers of Loop.

Loop has been embroiled in numerous crises on many fronts. The Dubai-based Khaitan family was entangled in the 2G scam and the company’s promoter I.P. Khaitan was also questioned by the CBI. Besides, the company has also been issued a notice for Rs. 800 crores in due by the Department of Telecommunications.

Loop, which has around 1 million active subscribers, will stop operations on 29 November and has asked its remaining subscribers to switch to a rival network. It was too late for the company to negotiate with other operators. As many as 30 lakh customers in Mumbai might be left in the limbo after Bharti Airtel did not renew its agreement to buy Loop Mobile which expired on October 30th 2014. If Bharti sticks to its decision, creditors to Loop Mobile will be affected, mainly Axis Bank which had struck a Rs. 350-crore deal and has an exposure of Rs. 215 crore.

The failure of the deal whose estimated value stands at about Rs. 700 crores brings into limelight the need for regulatory clarity in the affairs of merger and acquisition guidelines to ensure that deals like these don’t fall through and the customers are not left in limbo.

At the end of August 2014, Loop Mobile was left with around 1.7 million subscribers. Bharti Airtel had 4.6 million subscribers at the same time in Mumbai, up from 4.4 million in February 2014, while Vodafone had 7.8 million. Had Bharti

Airtel successfully got most of Loop’s subscribers, it would have been a close second to Vodafone in Mumbai. In return, the deal would have enabled Loop to pay off its debt of more than Rs.300 crores owed to financiers and around Rs.800 crores owed to the telecom department in spectrum usage fees and license charges.

Intern at The Startup Journal