Airtel to buy Tata Tele in debt-free, cash-free deal
NEWDELHI: Tata Sons Ltd will sell its consumer mobile business to India’s largest telecom operator Bharti Airtel Ltd virtually for free, as part of the group chairman’s strategy to exit businesses which have been a prolonged drag and have little visibility of future profits.
Airtel is acquiring the assets on a debt-free, cash-free basis, except for it assuming a fraction of the unpaid spectrum fees that the Tat a group ow es to the department of telecommunications (DoT), the companies said in a joint statement on Thursday.
The telecom industry, particularly smaller operators such as Tata Teleservices Ltd, has been hobbled by a crippling price war after the entry of Reliance Jio Info comm Ltd, backed by India’ s richest man Mukesh Ambani.
This has triggered a wave of consolidation in the industry, including a merger between Vodafone India Ltd and Idea Cellular Ltd. Airtel’s acquisition of the Tata assets will help narrow the gap between it and the Vodafone-Idea combine. Bharti Airtel will assume ₹2,000 crore of the ₹10,000 crore that the Tata group companies owe Do T, according to a person with direct knowledge of the matter.
All other liabilities and dues will be settled by the Tata group, the statement said.
The merger is subject to requisite approval sand involves two of the Tat a group companies—Tat a Teleservices Ltd and Tata Teleservices (Maharashtra) Ltd (TTML).
Airtel will absorb Tata’s mobile phone operations across the country in 19 circles (17 under Tat a Te le services and two under TTML). These circles represent the bulk of India’ s population and mobile customer base.
Tata Te le services had a subscriber base of 44 million and revenue market share( RMS) of 5% at the end of the June quarter, according to Goldman Sachs. With the merger, Airtel’s overall subscriber base is now expected to increase to as much as 351 million as against the combined Vodafone-Idea’s projected 391 million consumer base.
Airtel’s RMS will also rise to more than 40% from 35.6% in September, at ad short of the combined 42% RMS of Vodafone- Idea. Tata’s average revenue per user stood at Rs159/month, lower than that of Airtel and Vodafone, but higher than Idea’s.
The acquisition will also bolster Airtel’s position vis-a-vis Reliance Jio, as Airtel will get access to 178.5 megahertz (MHz) spectrum (of which 71.3MHz is liberalized or free to trade) in the 850 MHz ,1,800 MHz and 2,100 MHz bands, and help it strengthen its 4G coverage.
“The acquisition of additional spectrum made an attractive business proposition. It will further strengthen our already solid portfolio and create substantial long-term value for our shareholders given the significant synergies ,” Sunil Bharti Mittal, chairman of Airtel, said in the statement.
“On completion, the proposed acquisition will undergo seamless integration, both on the customer as well as the network side, and further strengthen our market position in several key circles,” Mittal added.
For Tata Sons chairman N. Chandrasekaran, the deal is in line with his strategy to do away with businesses which area drag on group profitability.
“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 long-standing customers and our employees has been the priority for us. We have evaluated multiple options and are pleased to have this agreement with Bharti,” said Chandrasekaran.
The employees of Tata Teleservices and TTML will be divided on the lines of the two businesses i.e. CMB (consumer mobile business) and E FL( Enterprise and Fixed Line and Broadband ), and, post an optimal manpower planning, will be moved accordingly.
Tata Sons is also in initial stages of exploring a combination of the enterprise business with Tat a Communications Ltd and its retail fixed line and broadband business with Ta ta Sky. Any such transaction will be subject to respective boards and other requisite approvals, the companies said in a statement.
“Tata and Bharti Airtel will work together to further explore other mutual areas of cooperation, that will be value-accretive for both the Groups,” the firms said in the statement.
Airtel’s acquisition will help narrow the gap between it and the VodafoneIdea.