Tata Teleservices-Bharti Airtel merger: Sunil Mittal is getting Tata's money-losing mobile unit for free

Mail Today Bureau   New Delhi     Last Updated: October 13, 2017  | 10:44 IST
Tata Teleservices-Airtel merger: Sunil Mittal is getting Tata's money-losing mobile unit for free

Bharti Airtel Ltd is acquiring virtually for free Tata Teleservices in a deal that will enable the Sunil Mittalled company to expand its subscriber base and spectrum network as the Tata Group opts out of a loss-making venture that has been draining its resources. The two companies announced on Thursday that they have entered into an understanding to merge consumer mobile businesses of Tata Teleservices and Tata Teleservices Maharashtra into Bharti Airtel. The acquisition is subject to requisite regulatory approvals.

The transaction will be done on a "debt-free cash-free" basis, the companies said in a joint statement, although Bharti Airtel will take over a "small portion" of Tata's unpaid liabilities for spectrum acquired in government auctions. Tata Teleservices and its unit Tata Teleservices (Maharashtra) Ltd have more than 40 million subscribers and rank ninth in India's telecom market, which had a total of 1.2 billion mobile subscriptions at the end of July.

As part of the deal, Tata's mobile customers in 19 service areas will shift to Bharti Airtel along with airwaves that Tata had purchased. "Tata and Bharti Airtel will work together to further explore other mutual areas of cooperation," the companies said. The Indian telecom sector is in the midst of a wave of consolidation after the entry of Mukesh Ambani-led, Reliance Jio which has unleashed a relentless price war that has driven down profits of leading telcos and forced others into losses.

Meanwhile, the shares of Bharti Airtel today shot up over six per cent. The company stocks were up 5.5 percent in early trade, outpacing a 0.35 percent gain in the NSE index. Shares in Tata Teleservices (Maharashtra) Ltd also rose 9.1 per cent. 

The telecom companies are going through a phase of financial distress as they are also saddled with huge debt raised for financing costly spectrum purchases. Bharti Airtel chairman Sunil Mittal said, "The acquisition of additional spectrum made an attractive business proposition. It will further strengthen our portfolio and create substantial long term value for our shareholders. On completion, the proposed acquisition will undergo seamless integration, both on the customer as well as the network side, and strengthen our market position."

The employees of Tata Services will be separated on the lines of the two businesses-CMB (consumer mobile business) and EFL (Enterprise and Fixed Line and Broadband)-and post an optimal manpower planning will be moved accordingly.

The statement also said Tata is in the initial stages of exploring a combination of its enterprise business with Tata Communications Ltd and its retail fixed-line and broadband business with satellite TV arm Tata Sky. Tata will retain its stake in tower company Viom, and will take care of the liabilities associated with it, according to the statement.

SNAPSHOT

 

  • Tata Consumer Mobile Businesses to merge with Bharti Airtel
  • Merger on a debt-free cash-free basis
  • Over 40 million customers to join Bharti Airtel and benefit from 4G mobile network with a fall back on its 3G & 2G ecosystem
  • All past liabilities and dues to be settled by Tata
  • Bharti Airtel will assume a small portion of the unpaid spectrum liability of Tata
  • Merger to bolster Bharti Airtel's spectrum pool with significant additional spectrum in 1800, 2100 & 850 MH bands, all widely used for 4G
  • Transaction will also provide Bharti Airtel right to use Tata's existing fibre network
  • Merger to strengthen Airtel's market share

 

Youtube
  • Print

  • COMMENT
A    A   A
close