Bharti gets Tata Tele cash-free, debt-free
~1,500-crore spectrum payout likely to be only cost in the deal
After taking Norwegian telco Telenor for virtually free earlier this year, leading operator Bharti Airtel has now acquired Tata Teleservices, taking consolidation to a new level in the stressed telecom sector.
The cash-free debt-free deal, which will bring in over 71 MHz of liberalised spectrum and add 40 million customers to the Sunil Bharti Mittal-led company at a throwaway price, will also mean that the $103-billion Tata group won’t have to shut down its telecom business and worry about thousands of job losses. In its 149-year-old history, the Tatas have never shut down any major unit, and this merger deal is being seen as a face-saver for the group.
With the acquisition of the Tatas’ wireless business, Airtel is getting a debt-free company while pushing its user base to around 321 million. The next largest telco in the country is Vodafone at a distant 208 million. However, once the VodafoneIdea merger is completed, the total subscriber base would cross that of Airtel’s. Idea has 191 million users as of August. The consolidation in the sector is being seen as an outcome of the competitive tariff being offered by newcomer Reliance Jio, which has managed 128 million subscribers in just one year.
The other gains for Airtel is that it gets 178.5 MHz spectrum (of which 71.3 MHz is liberalised) in the 850, 1800 and 2100 MHz bands across 19 circles and right to use Tata’s existing fibre network. It may also emerge as the preferred telecom partner for the Tata Group, executives said. Bharti Airtel will however take over the operational losses from November 1, sources said. Tata Teleservices will have to pay off the accumulated debt at over ~34,000 crore (for TTSL and TTML together). The two companies made it clear that all the past liabilities and dues would be borne by the Tatas. Out of the total deferred spectrum cost for the Tatas at an estimated ~10,000 crore, around ~1,500 crore is likely to be picked up by Airtel.
The remaining ~8,500 crore would be paid by the Tatas to the Department of Telecom, sources said. Of course, the 5,500- odd employees of Tata Teleservices would not lose their job, a risk they would have faced in case of a closure. There’s no estimate yet of how many employees will be absorbed in the new set- huge operational costs and therefore giving it for no cost is still a better option than shutting down, sources said.
Sunil Bharti Mittal, chairman, Bharti Airtel, said, “This is a significant development towards further consolidation in the Indian mobile industry and reinforces our commitment to lead India’s digital revolution by offering world-class and affordable telecom services through a robust technology and solid spectrum portfolio.” On completion, the proposed acquisition will further strengthen Airtel’s market position in several key circles, he added.
Bharti Board which met Thursday afternoon has approved this transaction.
N Chandrasekaran, chairman, Tata Sons, said, “We believe today's agreement is the best and most optimal solution for the Tata group and its stakeholders. Finding the right home for our longstanding customers and our employees has been the priority for us. We have evaluated multiple options and are pleased to have this agreement with Bharti.’’
“THIS ISASIGNIFICANT DEVELOPMENT TOWARDS CONSOLIDATION INTHE MOBILE INDUSTRY” SUNIL BHARTI MITTAL, chairman, Bharti Airtel
“WE BELIEVETHISAGREEMENT ISTHE BESTAND MOST OPTIMALSOLUTION FOR THETATAGROUPAND ITS STAKEHOLDERS” N CHANDRASEKARAN, chairman, Tata Sons