Bharti Breaks Away from Plan to Form a Mega Al­liance with Tatas

To in­stead fo­cus on strength­en­ing fi­nances; Big in­vestor Sing­Tel said to be not keen on ‘multi-play’ buy­out

The Economic Times - - Companies: Pursuit Of Profit -

Deepali Gupta, Arijit Bar­man & Romit Guha

New Delhi | Mumbai: Bharti En­ter­prises has dropped a plan to pur­sue a mega al­liance with the Tata Group’s tele­com, over­seas ca­ble and en­ter­prise ser­vices, and di­rect-to-home TV busi­nesses, sev­eral peo­ple fa­mil­iar with the mat­ter said.

Su­nil Mit­tal-headed Bharti, bur­dened with debt of .₹ 87,840 crore at the end of June, will in­stead fo­cus on strength­en­ing its books through a strate­gic stake sale in tower arm Bharti In­fratel and on clos­ing ac­qui­si­tions, in­clud­ing the takeover of Te­lenor In­dia, as it tack­les bru­tal com­pe­ti­tion in the mar­ket, the peo­ple said.

Sin­ga­pore Telecom­mu­ni­ca­tions, which owns over a third of Bharti Air­tel, was keen to cherry pick the en­ter­prise busi­ness of Tata Te­le­ser­vices and Tata Com­mu­ni­ca­tions and not take on the com­plex­i­ties of such a ma­jor “multi-play” buy­out in­volv­ing stake­hold­ers which in­cluded public share­hold­ers and the Gov­ern­ment of In­dia, the peo­ple said on con­di­tion of anonymity be­cause the talks are in the pri­vate do­main. More­over, Sing­Tel felt in­te­grat­ing such a large op­er­a­tion into Bharti would take away from its core fo­cus of win­ning against the Re­liance Jio In­fo­comm jug­ger­naut.

It was not clear if the Bharti board had re­jected a for­mal pro­posal. Peo­ple directly in­volved said the mat­ter was dis­cussed among the “high­est lead­er­ship fo­rums of the group”.

Both sides dis­cussed a pos­si­ble merger be­tween un­listed Tata Te­le­ser­vices and Tata Sky and listed Tata Com­mu­ni­ca­tions with Bharti Air­tel, in­clud­ing its wholly-owned DTH arm. The talks were said to have gath­ered mo­men­tum af­ter N Chan­drasekaran took charge as chair­man of Tata Sons, In­dia’s largest con­glom­er­ate, in Fe­bru­ary.

“We keep eval­u­at­ing op­por­tu­ni­ties from time to time. How­ever, at this stage there is noth­ing to re­port,” a Bharti Air­tel spokesper­son said in an email. A Tata spokesper­son de­clined to com- ment. A Sing­Tel spokesper­son said the com­pany does not com­ment on mar­ket ru­mours. ET in its July 7 edi­tion was the first to re­port that both sides were in early-stage talks.


“Air­tel also doesn’t have the strate­gic man­age­ment band­width avail­able to pur­sue a mega-con­sol­i­da­tion with a trou­bled Tata Tele and get­ting bogged down in the process when it’s fight­ing a bruis­ing bat­tle with Jio to re­tain cus­tomers,” an in­dus­try of­fi­cial said.

While Tata’s en­ter­prise and DTH busi­nesses were con­sid­ered at­trac­tive, they are not pri­or­ity ar­eas for Air­tel, which has a pretty strong en­ter­prise busi­ness of its own, they said.

Be­sides, the fre­quency of Tata Tele’s spec­trum hold­ings dif­fer from those de­ployed on the Air­tel net­work. Air­tel would have had to pay close to $1.7 bil­lion to ac­quire Tata Tele’s air­waves and use them for 4G ser­vices, a big ask in th­ese times of fi­nan­cial stress, the in­dus­try of­fi­cial said.

A merger, though, would have en­abled Air­tel to close the gap with the Idea Cel­lu­lar-Voda­fone In­dia com­bine, both in terms of sub­scribers and rev­enue mar­ket share. For the Tatas, a com­bi­na­tion would have pro­vided an op­por­tu­nity to fold their loss-mak­ing tele­com busi­ness into a big­ger com­pany and be­come mi­nor­ity in­vestors. The Tatas have been look­ing to exit the busi­ness over the past few years and even held dis­cus­sions with Voda­fone.

Chan­drasekaran re­cently put all three en­ti­ties in the same clus­ter, a move that ob­servers saw as a pre­cur­sor to ex­plore a “big-bang so­lu­tion”.

How­ever, debt of over .₹ 30,000 crore, shrink­ing mar­ket share and mount­ing losses re­main ma­jor draw­backs even if a long­stand­ing dis­pute with NTT Do­como is set­tled.

In ad­di­tion, the merger would have formed a stronger en­ter­prise player with a large op­tic-fi­bre net­work. The Tata-Bharti com­bine would have dom­i­nated the DTH space, leav­ing Dish TV-Video­con, which is poised to be­come the mar­ket leader af­ter their merger takes ef­fect, far be­hind.

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