Tata Tele hangs up on mo­bile busi­ness; Air­tel picks it up

‘No cash, no debt’ deal gives Air­tel ac­cess to spec­trum, 40 mil­lion users

The Hindu Business Line - - FRONT PAGE - RA­JESH KURUP

End­ing a 20-year-old saga of poor de­ci­sions and mount­ing losses, Tata Te­le­ser­vices on Thurs­day said it will merge its con­sumer mo­bile busi­nesses with Bharti Air­tel in a cash­less deal.

The deal con­sol­i­dates Air­tel’s stand­ing as the coun­try’s No. 1 op­er­a­tor in terms of rev­enue mar­ket share even if the Voda­fone-Idea merger were to go through.

It also gives Air­tel ac­cess to valu­able spec­trum to thwart the lat­est chal­lenge in 4G ser­vices from Re­liance Jio.

Un­der the deal, Air­tel will get ac­cess to 178 MHz of ad­di­tional spec­trum and 40 mil­lion sub­scribers. Air­tel is not pay­ing any­thing to Tata Tele other than ab­sorb­ing a sub­stan­tial num­ber of the 5,000 em­ploy­ees and pay­ing part of the spec­trum li­a­bil­ity that the lat­ter owes to the Depart­ment of Tele­com.

Tata Tele will re­tain the en­tire debt on its books in ad­di­tion to cer­tain as­sets, in­clud­ing fixed line, broad­band, en­ter­prise op­er­a­tions and its stake in tower com­pany Viom Net­works.

To­wards con­sol­i­da­tion

“This is a sig­nif­i­cant de­vel­op­ment to­wards fur­ther con­sol­i­da­tion in the Indian mo­bile in­dus­try...and fur­ther strengthen(S) our mar­ket po­si­tion in sev­eral key cir­cles. The ac­qui­si­tion of ad­di­tional spec­trum made an at­trac­tive busi­ness propo­si­tion,” Bharti Air­tel Chairman Su­nil Bharti Mit­tal said.

“It will fur­ther strengthen our al­ready solid port­fo­lio and cre­ate sub­stan­tial long-term value for our share­hold­ers given the sig­nif­i­cant syn­er­gies,” Mit­tal added. This is Air­tel’s sev­enth ac­qui­si­tion in the past five years.

An­a­lysts at Bank of Amer­ica Mer­ill Lynch said the deal was in­cre­men­tally pos­i­tive for Bharti. “We see the merger gen­er­at­ing opex and capex syn­er­gies for Bharti, and fits in well with its strat­egy of ac­quir­ing spec­trum from smaller play­ers, as they have done in re­cent past in trans­ac­tions with Te­lenor, Air­cel, Qual­comm, Video­con and Augere wire­less,” the an­a­lysts noted.

“We be­lieve the trans­ac­tion will con­trib­ute to pos­i­tive EBITDA within a few quar­ters of com­ple­tion,” they added.

₹40,000-cr debt pile

For the Tata Group, the deal is part of Chairman N Chan­drasekaran’s plans to exit a loss-mak­ing busi­ness. Tata Tele has a debt of about ₹40,000 crore. The com­pany’s losses have been mount­ing over the past few years after the op­er­a­tor failed to sus­tain in­vest­ments in both CDMA and GSM net­works.

Ac­cu­mu­lated losses stood at ₹38,175 crore as of March. Tata Sons has in­vested at least ₹50,000 crore in the busi­ness over the last two decades.

“There are many er­rors that Tata Tele did, but the big­gest of them was to run du­pli­cate net­works on dif­fer­ent tech­nolo­gies. It could also not cap­i­talise on the part­ner­ship with NTT Do­CoMo,” said a for­mer Tata Tele ex­ec­u­tive.

While the deal with Air­tel does not help Tatas re­duce the debt pile, it is ex­plor­ing the op­tion of com­bin­ing Tata Tele’s tele­com en­ter­prise busi­ness with group com­pany Tata Com­mu­ni­ca­tions and its re­tail fixed­line and broad­band busi­ness with Tata Sky.

“We be­lieve to­day’s agree­ment is the best and most op­ti­mal so­lu­tion for the Tata Group and its stake­hold­ers,” Chan­drasekaran said.

“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 Air­tel,” he added.

Am­resh Nanadan, Re­search Di­rec­tor at Gart­ner, said the deal was a good step as it en­ables the Tata Group’s cus­tomers to move to an­other op­er­a­tor in­stead of clos­ing down op­er­a­tions.

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