Indian incumbent Bharti Airtel is reportedly in talks over a potential acquisition of Mumbai-based mobile operator Loop Mobile.
Loop's owners are seeking an exit from the telecom sector, and have been holding discussions with potential buyers including Airtel, India's Economic Times reported, citing insider sources.
But the companies will likely not be able to reach a final deal until important regulatory issues - including clarification on proposed new rules requiring an operator buying a rival to pay a spectrum acquisition fee – are resolved.
Loop Mobile has been operating in Mumbai since 1995, and has around 3 million subscribers. But a more attractive asset for potential buyers could be the company's 8 MHz of 900-MHz spectrum in the region.
Loop's license to this spectrum is due to expire in September 2014, but the company is taking legal action against the government arguing it is eligible for a 10-year extension.
Sources ET spoke to said Loop's owners would prefer not to pay spectrum renewal fees themselves, so depending on how the new M&A rules turn out, the companies may try to close a deal before the expiration of the current license.
Airtel last month reported its 14th straight quarter of declining net profit. But its fiscal first quarter revenue grew 9.2%, in what the operator hailed as a sign that the Indian telecom sector is finally starting to stabilise after years of intense competition and regulatory uncertainty.