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In February 2014, Bharti Airtel entered into an agreement with Loop Mobile to acquire Loop’s subscribers, as well as some of its assets, for about Rs700 crore. Photo: AFP
In February 2014, Bharti Airtel entered into an agreement with Loop Mobile to acquire Loop’s subscribers, as well as some of its assets, for about Rs700 crore. Photo: AFP

The curious case of Airtel’s Loop buyout

The deal is in limbo and rival telecom firms are out to make the best of it, but Loop customers aren't amused

Mumbai/New Delhi: Srinivas Krishnan is a reasonable man. After all, he used to be a journalist once. But over the past few days, he’s kind of lost it. It started when Loop Mobile sent him an innocuous sounding text message: “Dear subscriber we will shortly conclude the arrangement for transferring all customers of Loop Mobile to Airtel. We thank you for your patience and support."

He was fine till the calls started coming.

From unknown numbers, from people posing as Airtel’s sales agents. Or Vodafone sales agents. And after a few calls, he didn’t just bother who was on the line selling him a connection.

“I got four calls yesterday," says Krishnan. “I kind of ignored them at first. But they’ve been relentless."

A harried Krishnan, who’s been a Loop Mobile customer since 1997, then reached out to his relationship manager. “His number had been disconnected. I then called the helpline, but in the last few days I have not been able to get through to an actual human being."

Krishnan is not alone. In the last few days, most of Loop Mobile’s 2.9 million customers have been complaining of a similar experience.

They aren’t safe while making calls either.

If they call a number on the Vodafone network, for instance, they hear a recorded message saying: “Join Vodafone without changing your number. SMS PORT space MOBILE NUMBER to 1900 and visit your nearest Vodafone store."

Given that Vodafone has the most customers in Mumbai, the Loop callers have to hear this message several times a day.

What’s happening is that the Loop customers are all up for grabs.

That’s because the whole Bharti Loop deal is in limbo. And by the looks of it, it has all the signs of a deal that can go completely awry. Here’s why.

In February 2014, Bharti Airtel Ltd, India’s largest telecom company by subscriber base, entered into an agreement with Loop Mobile to acquire Loop’s subscribers, as well as some of its assets, for about 700 crore. Soon after, the Telecom Regulatory Authority of India (Trai) weighed in.

The message sent out by Loop Mobile suggesting transfer of its subscribers to Airtel was illegal, Trai pointed out. In a letter to the Department of Telecommunications (DoT), Trai stated that the “proposed transfer will be against the present licensing terms and conditions and will also contravene the Telecommunications Mobile Number Portability (MNP) Regulation, 2009." Trai added that if the move was allowed, then the centre would stand to lose money that it would have otherwise made if the customers ported to another network. Mint has a copy of the document.

Trai’s opposition reflects the confusion surrounding telecom mergers in the post-MNP era. Before portability was allowed, there have been many mergers. In some ways, the Loop sale should have been easy because the licence wasn’t being transferred: it was only customers and other “assets" mentioned when the deal was struck that were being transferred to Bharti.

Still, by invoking MNP, Trai threw a spanner in the Bharti Airtel Loop Mobile deal.

Meanwhile, Loop Mobile has been getting desperate. In a letter dated 9 October 2014 to DoT, Sandip Basu, managing director of Loop Mobile, made a case that the firm is running out of time and it needs an expeditious approval. He tried to clarify that there was no portability being considered.

“Since the aforesaid request has been pending for over six months and since the company’s licence and spectrum are set to expire on 29th October 2014, merely 2 months from now; therefore, due to the paucity of the time and to facilitate an expeditious approval, we now propose to transfer/migrate Loop’s subscribers only to Airtel excluding the telecom network equipment," wrote Basu. Mint has a copy of the letter.

Basu doesn’t stop just about there. There are other concerns he addresses. He makes the case that if the deal doesn’t happen, it will lead to losses for Indian banks which have extended project financing loans to the firm, as it does not have the financial ability to pay back. In that case it will be forced to wind up operations.

He further adds: “Non approval of the transfer/migration would also cause loss to the exchequer in the form of loss of revenue share fee that Loop would have otherwise paid in relation to the transfer/migration consideration, and MNP fee that we have earlier offered to pay even though the transfer/migration does not require MNP services."

Basu then makes the case that Loop Mobile customers can use Mobile Number Portability if they so desire, before or after the transfer to Airtel.

Of course, none of this has been communicated to Loop subscribers as yet. The last message sent out on 14 October is this: “Dear Subscriber We will shortly transfer our customers to Bharti Airtel network and you will be able to enjoy 3G & other services. Please await our communication."

Bharti Airtel declined to comment. Surya Mahadevan, chief operating officer of Loop Mobile, said his firm has applied to DoT for approval and is expecting it next week.

“The moment we get the DoT approval and based on the overall guidelines for the letter in terms of the business transfer, we will be executing it," he said. “Everybody has their own vested interests, so they were trying to blow the issue out of proportion... but now all issues have been addressed and the deal should go through now."

It is another matter altogether that Loop’s 2.9 million subscribers are being poached by the hour. A senior Vodafone official who requested not to be quoted says that the basic industry MNP data shows that in the last nine months (January-September 2014), more than 45% of Loop customers have ported to Vodafone. In fact, Vodafone has been running a campaign in Mumbai over the last few weeks, offering MNP at the customer’s doorstep. Vodafone declined to comment for the story.

All of this raises an important question. If there are no subscribers left, or whatever little is left of them before 29th November 2014, then what exactly is Bharti Airtel buying from Loop Mobile?

A person familiar with deal, who spoke on the condition of anonymity, said that it is quite likely that Bharti would pay far less than the 700 crore it initially offered for the company. Of course, that is if the deal gets DoT’s clearance. As things stand today, money has not changed hands. That’s for sure. And the only sure thing about this deal is that it is in limbo.

So is the future of Loop Mobile’s current subscribers.

Krishnan is not amused.

Beryl Menezes in Mumbai contributed to this story

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