Bharti gets Tata Tele cash-free, debt-free

~1,500-crore spec­trum pay­out likely to be only cost in the deal

Business Standard - - FRONT PAGE - KI­RAN RATHEE & ABHINEET KU­MAR

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

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