Tata di­als Air­tel, tele­com con­sol­i­da­tion to ac­cel­er­ate

Mint ST - - FRONT PAGE - BY AMRIT RAJ amrit.r@livemint.com NEW DELHI

Air­tel agrees to buy Tata’s con­sumer mo­bile busi­ness on a debt-free, cash-free ba­sis

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 Tata group owes 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 In­fo­comm Ltd, backed by In­dia’s rich­est man Mukesh Am­bani.

This has trig­gered a wave of con­sol­i­da­tion in the in­dus­try, in­clud­ing a merger between the na­tion’s sec­ond largest op­er­a­tor Voda­fone In­dia Ltd and No. 3 Idea Cel­lu­lar Ltd to cre­ate a com­pany that will be big­ger than Air­tel. Air­tel’s ac­qui­si­tion of the Tata as­sets will help nar­row the gap between it and the Voda­fone-idea com­bine, once the merger is com­pleted.

Air­tel will as­sume Rs2,000 crore of the Rs10,000 crore that the Tata group com­pa­nies owe DOT, 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 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.

Tata will re­tain its stake in Viom Net­works and take care of the li­a­bil­i­ties as­so­ci­ated with it. Viom, a joint ven­ture between Tata Te­le­ser­vices and SREI In­fra­struc­ture, is In­dia’s largest in­de­pen­dent telecom­mu­ni­ca­tions in­fra­struc­ture com­pany.

The trans­ac­tion will also give Air­tel an in­de­fea­si­ble right to use part of the ex­ist­ing fi­bre net­work of the Tata com­pa­nies.

The In­dian tele­com sec­tor has been hit hard by the twin trou­bles of ex­or­bi­tant spec­trum costs over the last five years and in­tense pric­ing pres­sures led by Jio in last 12 months. Smaller tele­com op­er­a­tors have been hit harder, with th­ese reg­is­ter­ing a 430 ba­sis points RMS loss and 30% de­cline in rev­enues since Q2 FY17, ac­cord­ing to CLSA.


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