Merger and Acquisition Synergy Benefits-

Bharti Airtel has acquired Tikona Digital’s 4G airwaves for Rs 1,600 crore, ramping up its
high-speed broadband spectrum capacity to take on Reliance Jio Infocomm and the
Vodafone-Idea Cellular combine in a fiercely competitive market which is seeing rapid
consolidation.

This acqusition narrowed the gap between Bharti’s pan-India 4G spectrum capacity and
Vodafone-Idea’s and Reliance Jio’s, although the difference will still be significant.

Bharti Airtel has subsequently followed a strategy of buying out companies with 4G
spectrum and this is the fifth such acquisition since 2015. It had acquired more airwaves in
the 4G auctions that took place last year. Airtel is engaged in a fierce battle with Reliance Jio,
which has disrupted both the voice and data markets with rock bottom rates, and it now also
has to reckon with a united Vodafone-Idea combine.

Spectrum capacity is critical for

quality of service to cater to an increasingly data-hungry subscriber base and can be the
difference between losing, retaining or acquiring new users in an intensely competitive
market.
Combining Airtel’s capacities in TD-LTE (2300 MHz) and FD-LTE (1800 MHz) will further
bolster network, and help them provide unmatched high-speed wireless broadband experience
to their customers.

The Tikona deal, which includes taking on debt of Rs 500-600 crore, will see Airtel net 100
MHz of 4G spectrum in the 2300 MHz (4G) band equally split across the five circles, taking
its total 4G holding to close to 880 MHz (including Telenor India), compared with 1,169
MHz for Jio and 1,089 MHz for the Vodafone-Idea combine. It will also get 350 cell sites in
those five circles but won’t take on any employees of Tikona.
Airtel’s acquisition of Tikona’s 4G spectrum filed the gap that it had in the TD-LTE (2300
MHz) band mainly in UP (East), UP (West) and Rajasthan circles, and adds capacity to
provide highspeed data services while also securing a pan-India footprint in the 2300 MHz
band.
The company rolled out high-speed 4G services on the newly acquired spectrum immediately
after the deal is closed in the next four to six weeks.

BENEFITS FOR BHARTI AIRTEL Ltd.

Apart from increasing spectrum capacity, Bharti Airtel’s weighted average spectrum usage
charges (SUC) reduced because Tikona’s SUC is at 1 per cent of adjusted gross revenue
(AGR).

Bharti was paying SUC of around 4.3 per cent of AGR. With the acquisition of Tikona’s
spectrum, Bharti’s SUC reduced by 25 basis points, translating into an annual savings rate of
Rs 100 crore. Considering the significant enhancement of data footprint and SUC savings
(NPV of Rs 1,000 crore), it was found that the acquisition added significant value to Airtel.

In a nutshell, we can conclude to the following points-

1. Spectrum: Tikona had acquired 20 MHz of 4G spectrum in the 2300 MHz band in five
circles - Gujarat, Himachal Pradesh, Uttar Pradesh (East), Uttar Pradesh (West) and
Rajasthan. Bharti Airtel was able to use this spectrum to improve its 4G network coverage
and capacity in these circles.

2. Customer base: Tikona had a small but growing customer base of around 250,000
customers. Bharti Airtel was able to add these customers to its existing customer base, which
helped it to further strengthen its position in the Indian telecom market.
3. Talent and expertise: Tikona had a team of experienced professionals who had expertise
in areas such as network planning, deployment, and operations. Bharti Airtel was able to
leverage this expertise to improve its own network operations.

4. Cost savings: Acquiring Tikona's 4G business allowed Bharti Airtel to avoid the costs
associated with acquiring spectrum and building a 4G network from scratch in the five circles
where Tikona had operations. This helped Bharti Airtel to save time and money in expanding
its 4G network coverage.

BENEFITS FOR TIKONA Ltd.

Tikona was founded in 2008 by former Reliance Communications executives Rajesh Tiwari
and Prakash Bajpai. Its other investors included Goldman Sachs, Oak Capital, IFC and
Everstone Capital. The company retained its home broad and wireless business. Company got
funds to expand and work on its home business.

Source:

https://economictimes.indiatimes.com/news/company/corporate-trends/bharti-airtel-to-
acquire-tikona-digital-ops-for-up-to-rs-1600-crore/articleshow/57793235.cms?
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