Malaysia’s leading telecom operator, Axiata, has backed out of its negotiations to pick up a substantial stake in broadband wireless access (BWA) operator Tikona Digital due to differences over valuation and uncertainty on the Indian telecom policy, following the cancellation of 2G licences by the Supreme Court.
The promoters of Tikona, say sources, had valued the company at $1 billion (Rs 4,900 crore). However, after the uncertainty over policy, Axiata backed out of the negotiations, saying the price was too high and the country’s telecom scenario very uncertain.
The promoters of Tikona, which had won BWA or 4G licences in five key regions of the country, including Gujarat, Himachal Pradesh and Rajasthan, and Uttar Pradesh (east and west) — for Rs 1,058 crore — were not willing to renegotiate the price downwards.
The Malaysian telco made its entry into the country by picking a 5.91 per cent stake in Idea Cellular, the country’s fourth-largest mobile operator. Its move to buy a substantial stake in Tikona would have given it a much larger presence in the Indian market, with a toe-hold in the 4G services business.
Among the factors that made Tikona attractive for Axiata was that, even before BWA, it had started offering high-speed broadband services across 20 cities by using un-licenced spectrum sanctioned by the government. Besides, unlike most other players in the space, Tikona had over a million subscribers across the country.
An Axiata spokesperson, when contacted in Malaysia, said: “Axiata does not comment on reports speculative in nature.” Prakash Bajpai, the CEO of Tikona, who founded the company along with Rajesh Tiwari — both former Reliance Communications employees — said: “As a policy, we do not comment on speculations.”
Goldman Sachs, the largest shareholder, Oak Investment Partners and Everstone Capital Advisors together hold 70 per cent in the company. Top sources say the other new investors who have been roped in by the company after it won its BWA licence include L&T Infrastructure, which has around 10 per cent, and Anand Rathi Securities. Bajpai and Tiwari have around 2 per cent stake in the company.
With the government virtually clamping on any fresh availability of 3G spectrum after their pact with the defence services (only one slot of 5 Mhz is available ), 4G is being seen as an attractive option for telcos which are increasingly being forced to look at data services for better margins.
Also, for most telcos, the limited availability of 3G spectrum has been a key reason for poor subscriber take-off. Telcos admit, with 20 MHz of spectrum being offered in 4G, compared to 3G services, these services will offer much faster data speed and unlimited access to consumers, as is the way forward. Besides, the government is also planning to auction at least three more slots of 4G shortly.
Incumbent operators, however, have BWA spectrum only in a limited number of circles — Bharti Airtel has spectrum in three circles and Aircel in eight, while Vodafone does not have in any circle. Bharti has already announced it would offer the first 4G services in Kolkata very soon.
However, Tikona has to face tough competition with Reliance Industries, which has acquired pan-Indian spectrum to operate BWA across the country. It is investing Rs 15,000 crore and is expected to roll out services by October this year and offer broadband services, including data, television and voice, to homes.
Tikona was expected to start offering 4G services sometime this financial year, said a person with knowledge of the matter.