Air­tel deal will help Tata Sons save Rs7,000-8,000 crore, says Agar­wal

Mint ST - - CORPORATE - BY SHALLY SETH MOHILE shally.s@livemint.com MUM­BAI mint

The Tata group’s plan to merge its mo­bile tele­phony busi­ness with Bharti Air­tel will help it save Rs7,000-8,000 crore, said group chief fi­nan­cial of­fi­cer Sau­rabh Agar­wal. In an in­ter­view, Agar­wal ex­plained the ra­tio­nale be­hind the cash-free, debt free deal and the crit­i­cal­ity of ex­it­ing a haem­or­rhag­ing busi­ness. Edited ex­cerpts: Why has Tata Sons opted for this route in­stead of wind­ing it down?

We chose to merge and it’s a huge cost sav­ing as the clo­sure cost for the size of this busi­ness is very large. We will end up sav­ing Rs7,000 crore to Rs8,000 crore which is ex­tremely im­por­tant for us. Plus we get to keep our tele­com tower stake which is also very crit­i­cal.

From our per­spec­tive, a part of our spec­trum goes away, our problems go away and our cus­tomers and em­ploy­ees find a new home and the whole sys- tem thrives.

The eq­uity value in the whole trans­ac­tion is zero. What­ever value re­mains in the en­ter­prise busi­ness and the amount of money that we need to pump in will be a call that will be taken by Tata Sons and re­spec­tive boards. This is just an ini­tial an­nounce­ment.

All this is still evolv­ing. We are in dis­cus­sions for rest of the busi­nesses. In the next five to six weeks once we sign the share­holder agree­ment, we will know what kind of cap­i­tal is re­quired to be in­fused into the re­main­ing busi­nesses. They will need ad­di­tional sup­port to pay off the li­a­bil­i­ties that both Tata Te­le­ser­vices and Tata Te­le­ser­vices Ma­ha­rash­tra have.

What por­tion of the un­paid spec­trum li­a­bil­ity will be taken care of by Bharti?

That is some­thing we will fig­ure out as we go along. They (Bharti) will take care of small part of the li­a­bil­ity and the rest will be taken care of by us. How does the move dove­tail with the larger con­sol­i­da­tion strat­egy of Tata Group?

The tele­com busi­ness was the first, sec­ond and third pri­or­ity for the chair­man (N. Chan­drasekaran) from the day he took over.

He met all stake­hold­ers in the in­dus­try and ev­ery­one was very sup­port­ive. There were sev­eral so­lu­tions and this is what worked fi­nally. Tata Te­le­ser­vices is not one but three busi­nesses—mo­bile, fixed line and broad band. Our En­ter­prise busi­ness is do­ing ex­tremely well and (it is) prof­itable. There is also no is­sue with broad­band and fixed line busi­nesses.

The con­sumer mo­bile busi­ness was the only prob­lem—it was sub­scale and beyond re­demp­tion and we had to find a so­lu­tion. In the light of all the changes in the in­dus­try, there was no way we would have sur­vived. This should have been done long back. It took Chan­dra to come and do it. Now that it’s done, it will give us time and man­age­ment band­width to fo­cus on growth.

Did you also con­sider do­ing a sep­a­rate deal for the spec­trum?

It’s all eas­ier said than done. Ev­ery­thing is so com­plex to ex­e­cute.

There are no guide­lines in In­dia for clos­ing down a busi­ness or do­ing any­thing of that na­ture. So it’s not pos­si­ble to delink one from the other. Spec­trum is a na­tional as­set, if some­thing has closed down, whether it should con­tinue with the owner is it­self a ques­tion mark. When Bharti bought Te­lenor it also took over its spec­trum re­lated li­a­bil­i­ties fully. But in this case, Bharti is tak­ing it only par­tially. Can that be con­sid­ered a bet­ter deal in that sense?

Frankly, it is not an in­fe­rior deal as com­pared to Te­lenor in any way.

Deals are al­ways con­tex­tual and it is dif­fi­cult to say what is a bet­ter or worse deal. At the end of the day, I have to see, what is in it for my cus­tomers and em­ploy­ees.

For me, it is im­por­tant to take care of the ecosys­tem rather than worry about small costs. We are quite ex­cited about the broad band and DTH busi­nesses—we will grow them and we are not ex­it­ing the tele­com busi­ness. We have the where­withal to take all the pains.

How do you plan to set­tle li­a­bil­i­ties you have to­wards Amer­i­can Tower Corp. (ATC)?

We will re­solve that am­i­ca­bly. We are part­ners and share­hold­ers. The busi­ness is go­ing to Bharti—its not wind­ing down.

They will fig­ure out what the right pro­vi­sions are. We will all sit down and have a ma­ture dis­cus­sion.

As share­hold­ers we will fig­ure out a so­lu­tion. This deal will en­sure, ATC con­tin­ues to be healthy with good cash flows.

IN­TER­VIEW

Tata Sons chief fi­nan­cial of­fi­cer Sau­rabh Agar­wal.

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