Bharti Airtel acquires 49% stake in Qualcomm's 4G broadband venture

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India's largest telecom company Bharti Airtel on Thursday said it had acquired 49% in Qualcomm's broadband wireless entities for around Rs 924 crore ($ 165 million) and would completely own the venture within the next two years.

Bharti Airtel acquired 26% equity from Global Holding Corporation and Tulip Telecom Limited and the balance through fresh shares. The stakeholders had bought equity for about $ 58 million immediately after the US-based chipmaker bought fourth-generation (4G) licences in 2010 in a government auction for $ 1 billion.

Bharti Airtel did not reveal the amount it would give to buy the remaining equity from Qualcomm to assume complete ownership of the India broadband venture by 2014-end.

With the acquisition, Bharti Airtel would extend its high-speed wireless data services to eight telecom zones including Haryana, Kerala and key circles like Delhi and Mumbai. Bharti had purchased telecoms licences for Kolkata, Karnataka, Punjab and Maharashtra in a government auction two years ago for Rs 3314.36 crore but lost out on acquiring metro circles.

This would make Bharti a serious competitor to Reliance Industries Limted-owned Infotel Broadband - the only company that secured pan-India permits to offer 4G services in all 22 circles in India. However, Bharti has a headstart over RIL as it has launched operations in Kolkata and Bangalore in the last couple of months, while RIL is yet to give any indication of beginning services.

Sunil Bharti Mittal, Chairman and Managing Director, Bharti Airtel said, "We are delighted to partner with Qualcomm, who shares our commitment to the Government's agenda of broadband for all. This partnership will combine the strength of Bharti's national telecom footprint and Qualcomm's technological leadership in the LTE TDD space. With a broadband ready network across India, Bharti is well positioned to lead the next phase of Indian's telecom revolution."

Qualcomm would provide technical assistance to Bharti in connection with network architecture and optimization, infrastructure and device testing, as well as continuing to develop and support the underlying technology and the LTE TDD ecosystem.

"One of our key objectives has been to include a strong partner in the Indian venture with the scale, experience and resources to deploy LTE TDD networks. We are pleased to have Bharti's participation and support in this effort," said Dr Paul E Jacobs, chairman and CEO of Qualcomm. The company has been pushing for adopting LTE as a platform for launching 4G services in India.

The company is set to challenge telecoms department's move to reduce the licence term of 20 years by 18 months since it did not comply with norms while applying for acquiring the licences in 2010.

Tulip Telecom said it would utilise the proceeds from divesting its 13% stake in Qualcomm's BWA venture to Bharti towards strengthening its balance sheet and driving growth.

Bharti Airtel rose 5.6% to close at Rs 297.8 while Tulip Telecom's scrip climbed 2.5% to close at Rs 75.7 on the Bombay Stock Exchange.

 

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Bharti Buys 49% Stake In Qualcomm India Broadband Unit


Bharti Airtel Ltd. (BHARTI), India’s largest mobile operator, bought 49 percent of Qualcomm Inc. (QCOM)’s fourth- generation wireless venture that will expand coverage of high- speed services to include the nation’s two biggest cities.

Bharti paid $165 million to purchase the stake in Qualcomm’s India unit, which owns licenses and spectrum to operate in four telecommunications zones, according to an e-mail statement today. Bharti will buy the rest of Qualcomm’s stake by the end of 2014, according to the statement.

Qualcomm, the biggest maker of mobile-phone chips, bought the licenses at an auction two years ago with the goal of propagating 4G technology known as long-term evolution, or LTE, in India and then selling them to a local operator. The deal doubles Bharti’s area for high-speed data coverage in the world’s second-largest market for mobile-phone services.

The spectrum, which allows operators to provide higher-cost services such as video downloads and streaming media, is coveted in India because call rates have fallen to as low as a penny a minute. The deal, including assumed debt, at completion in 2014 will be worth as much as $1.2 billion, according to a person familiar with the deal.

Qualcomm, based in San Diego, bought licenses for Mumbai and the states of Delhi, Kerala and Haryana in a government auction in June 2010, paying 49.1 billion rupees ($882 million) for the rights. About 80 percent of the purchase was financed with debt, two people familiar with the matter said.

Local Partners

Bharti bought Qualcomm’s local partners Tulip Telecom Ltd. (TTSL) and Global Holding Corp., which each held 13 percent of the joint venture. Tulip and Global each received about $40 million in cash from Bharti, one of the people said. Barclays Plc advised Qualcomm on the deal.

Raza Khan, a spokesman for Bharti, and Ramakrishna Bellam, a spokesman for Global Holding, declined to comment. Tulip Chairman Hardeep Singh Bedi also declined to comment.

Bharti, based in New Delhi, also participated in the 4G auction in 2010, agreeing to pay 33.1 billion rupees for permits in the states of Maharashtra, Karnataka, Punjab and Kolkata.

India, which divides the nation into 22 telecommunication zones, auctioned the licenses individually.

Infotel Broadband Services Ltd., now a unit of billionaire Mukesh Ambani’s Reliance Industries Ltd. (RIL), was the only company that secured 4G licenses in all
22 zones.

Shares of Tulip rose 2.7 percent to 75.45 rupees at close in Mumbai. Bharti surged 5.6 percent to 297.80 rupees, the most since Feb. 2.

 

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Qualcomm buy will give Bharti nationwide leadership in 4G


Bharti Airtel, on Thursday agreed to buy a 49 percent stake in Qualcomm’s fourth-generation (4G) broadband venture in the country for Rs 907 crore, in a move that would give India’s biggest mobile phone carrier a national footprint in broadband through a combination of 4G and 3G networks. In 4G, it also becomes the top rival to Reliance Infotel.

The acquisition will give Bharti access to four telecoms zones, including the lucrative Delhi and Mumbai cities, where it does not have its own 4G airwaves. Bharti already has broadband wireless association (BWA) licences in four circles — Kolkata, Karnataka, Punjab and Maharashtra for which it paid Rs 3,316.4 — and 3G licences in 13 circles. The company recently launched commercial 4G networks in Kolkata and Bangalore cities.

With this agreement, Bharti has secured a nationwide broadband leadership through a combination of 4G and 3G, with its own networks in 18 circles. Qualcomm, which was embroiled in a dispute with the telecom ministry, was granted 4G airwaves this month, nearly two years after it won them in the auction. The ministry cut the usage period of the airwaves by 18 months to 18.5 years though.

IIFL telecom analyst GV Giri told CNBC-TV18 the acquisition is a positive move for the long-term and offers Bharti the ability to exploit the impact of inevitable explosion of data in India. He maintained a buy call on the stock despite the downturn and said the company will be able to monetise revenues after two-to-three years.

“This is a positive move for Bharti considering early adopters of the 4G technology will come from the Mumbai and Delhi circles. As far as RIL goes, by the time they set up the network and start operation. Bharti is most likely to have rolled out in eight circles by then. So the telco is expected to have an upper hand over RIL, which is likely to play the pricing game,” Ankita Somani, research analyst at domestic brokerage firm, Angel Broking told Times of India.

Shares in Bharti, valued at about $20 billion, ended up 5.6 percent to post their biggest single day gain in more than three months on Thursday, while the broader market closed 1.7 percent higher.
However, not everyone feels the deal is a win-win. Karan Mittal of ICICI Direct says there may not be much financial gain for Bharti right away as the acquired entity has a debt of around $1-1.2 bullion. “Even in 3G, Bharti is earning about Rs 100-150 crore revenue per quarter. So I do not think it will contribute meaningfully. But what it does for Bharti is that it gives them a lot of spectrum in the current scenario wherein this is a spectrum crunch and hue and cry over the regulatory concerns,” he told ET Now.

But Mint, citing another telecom analyst argues that since Bharti will only acquire the rest of the stake in the second phase of the transaction in 2014, and is currently keeping Qualcomm’s debt out of its books, Bharti will be able to invest in the rolling out of services immediately, especially in the key circles of Delhi and Mumbai.

Qualcomm, which is pushing for the deployment of LTE (long-term evolution) broadband technology in India, has previously said it is looking at one or more operator partners in the India broadband venture. The company had bid for airwaves, not because it wanted to run the network but because it wanted to ensure that its LTE technology was used in operating 4G services in the country

Reliance Industries , controlled by India’s richest man Mukesh Ambani, is the only company to have 4G airwaves in all 22 telecoms zones in India. But it is yet to start commercial services. The company is expected to launch LTE TD-based data services by the last quarter of the current fiscal year or early next year.