Telecom exposure of Tata group stands at ~47,000 crore
After its exit from the consumer mobile business, the Tata group, which had invested ~47,208 crore in the past 15 years through equity and debt, would now have two businesses — enterprise business and retail fixed-line and broadband business. Besides, it would have a 32 per cent stake in Viom Networks.
Going by the announcement, Bharti Airtel would not take any debt liability of Tata Teleservices (TTSL) and Tata Teleservices (Maharashtra) (TTML), except for a small spectrum payout liability.
At the end of March, various Tata group companies, led by Tata Sons, had made cumulative equity investments worth ~11,653 crore, including preference shares, in TTSL. Tatas’ equity investment in TTML stood at ~1,466 crore.
TTSL and TTML together had combined debt of ~34,089 crore, excluding deferred payment liabilities for spectrum, according to Crisil’s rating rationale dated July 7.
TTSL had 36.5 per cent stake in TTML at the end of June this year. Other promoters companies, including Tata Sons, own another 38 per cent stake in TTML that is listed on the stock exchange.
On the asset side, TTSL would be left with a 32 per cent stake in its telecom tower company Viom Networks; its enterprise business and the retail fixed-line and broadband business.
TTSL has said that it would look at merging its enterprise business with Tata Communications. The company’s retail fixed line and broadband business would be merged with Tata Sky, the group’s direct-to-home TV broadcasting service.
As far as Viom Networks is concerned, a consortium of investors including Tatas had divested 51 per cent stake in the firm for ~7,600 crore in October 2015. If the valuation were the same, Tatas’ 32 per cent holding would be valued at ~4,800 crore.
Besides Viom, the group would need to look at the enterprise, fixedline and broadband businesses, to reduce its losses. There is no information on the valuation of TTSL and TTML’s non-mobile business.
The Tatas entered the telecom industry as soon as the sector was opened up for private investment during the 1990s. After differences erupted with its then equity partners, AT&T and the Aditya Birla group, the Tata group decided to enter the sector on its own and sold their stake in Idea Cellular to the Birlas. The second innings of the Tatas in the telecom sector has not been a success. In 2009, the Tatas brought in NTT DoCoMo as a partner and sold 26.5 per cent stake for close to $2.4 billion. Later, as TTSL failed to meet its financial milestones, DoCoMo decided to exit the company in 2014. After a prolonged court battle, the Tatas decided to settle all pending issues with DoCoMo early this year, and agreed to buy back TTSL shares by paying ~8,000 crore.
Soon after he was removed as Tata group chairman, Cyrus Mistry had warned that if the group exits telecom, it would end up with writedowns worth $4-5 billion, apart from paying $1.2 billion to DoCoMo.
At the end of March this year, various Tata group companies led by Tata Sons had made cumulative equity investments of ~11,653 cr in TTSL