The company did not disclose the size of deal but sources close to the agreement said it is for about Rs. 700 crores. Loop Mobile has a debt of Rs. 400 crores, which is likely to be included in the final transaction.
Under the agreement, Loop Mobile's 3 million subscribers in Mumbai will join Airtel's over 4 million subscribers, making it a largest network in the metropolitan city, according to a statement by Bharti Airtel. Vodafone with 6.9 million customers (as of November) is the biggest operator in Mumbai at present.
Under the proposed transaction, Loop Mobile's 2G-enabled network supported by 2,500 plus cell sites will also become part of Airtel's network which has over 4,000 cell sites at present.
The agreement will ensure continuity of services to Loop Mobile's subscribers, whose licence is expiring in November, with option to access Airtel's services. As per present rules, Loop, which holds 8MHz of airwave frequency in 900MHz band, was required to participate in the auction that concluded on February 13 to win back its spectrum for continuing operations.
The company, however, did not participate in the auction.
Sources added that under the agreement, Airtel will not acquire employees of Loop Mobile. Status of Loop's employees could not be immediately ascertained.
This buyout is the first merger in the Indian mobile market, and indicates the industry is ready for consolidation. While the government is about to announce new M&A guidelines, the deal can go through even under the existing rules.
Written with inputs from PTI