Airtel to buy Tata Tele in debt-free, cash-free deal
the country in 19 circles (17 under Tata Teleservices and two under TTML). These circles represent the bulk of India’s population and mobile customer base.
Tata Teleservices 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, a tad 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 850MHZ , 1,800MHZ and 2,100MHZ 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 are a 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 EFL (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 Tata Communications Ltd and its retail fixed line and broadband business with Tata 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.