SAYING TATA TO TELECOM

A fter burning its fingers in the telecom sector, Tata Group is finally exiting the wireless mobile business. India’s largest telecom operator Bharti Airtel has agreed to acquire Tata Teleservices (TTSL) and Tata Teleservices Maharashtra (TTML). A fringe player in the market, Tata Tele has a customer base of 40 million and operates in 19 of the 22 circles with 178.5 MHz spectrum. Since last year, both TTSL and TTML are fast losing their customers to bigger telcos offering extremely competitive pricing.

While the Tatas have been looking for a suitor for its telecom business, the high debt incurred by its mobile business, of around ` 40,000 crore, posed the biggest hindrance to its sell-off plans. Earlier this year, the company settled its longstanding legal dispute with NTT DoCoMo that might have affected any deal. For Airtel, it is the sixth acquisition in less than two years that will help the telecom giant strengthen its presence in the 4G market and close the gap with the Vodafone-Idea Cellular combine in terms of market share, spectrum holding and subscriber base. Post the Tata deal, Airtel will have 321 million subscribers, while Vodafone-Idea has 399.2 million.

Going by the broad numbers, it seems Airtel has got itself a decent deal. It will be reportedly a “debt-free, cash-free” one in which Tatas will clear the past dues, and Airtel will start with a clean slate. However, Airtel will take over around ` 2,000 crore of debt that the Tatas owe to Department of Telecom for spectrum purchase as well as the operational contracts such as tower leases and the existing employees. Airtel would not have to leverage its balance sheets further because the spectrum payments are made on a deferred basis.

Tata Group entered the mobile telecom business in 1992, but the decisions it took regarding the business were not particularly aligned with market realities. Its decision to quit may turn out to be the wisest decision that the salt-to-software conglomerate had taken.