Loop Mobile has chosen the unexpected option of not participating in the upcoming spectrum auction, even though its spectrum and license will expire in November.
That means the company is taking a big risk as the mobile operations were valued at about $0.8-1.0 billion in 2005 when it changed hands from long-time promoter BPL’s TPG Nambiar, and it would be worth only only a few hundred million dollars or less without spectrum. In addition, Loop Mobile’s 3 million subscribers in Mumbai could find themselves without a connection after November 29.
There are, however, two options before Loop, owned by the Khaitan group, to retain its subscribers and for the promoter to get back some of his investment — sell the subscribers, or ink a spectrum sharing agreement with another operator.
From the current strategy, that seems to be exactly what Khaitan Holdings Mauritius Ltd seems to have in mind.
Industry sources say that the government has held back spectrum sharing guidelines just to ensure that lots of people buy spectrum in the upcoming auction. Once the spectrum auction is over, the government would issue guidelines that allow companies to share, or in other words sell, spectrum to other players.
Loop can also ink a branded service deal of the type that Virgin Mobile and Big Bazaar group have inked with Tata Teleservices.
The final option is for Loop to sell its subscribers to an existing operator such as Vodafone, or to a new entrant like Telenor Telewings, which is reported to be interested in buying spectrum in Mumbai. The sale would have to be conducted before November.
According to reports, Loop has been in talks to sell its subscribers for over a year, with talks with Bharti Airtel and Vodafone not going anywhere due to the valuation quoted by the Khaitan group.