Tata Teleservices clutches 'free' Airtel lifeline

Country's largest telecom service provider Bharti Airtel will acquire consumer mobile business (CMB) of the Tata Group on a 'debt-free cash-free' basis.

The deal will allow Airtel to acquire 40 million subscribers of Tata Teleservices Ltd (TTSL) and Tata Maharashtra Ltd (TTML) across 19 circles, which represent bulk of country's population and customer base, according to a statement released by both the companies.

The deal will save the Tatas from the prospect of having to shut down the struggling unit.

It will enable Airtel to bolster its strong spectrum holdings with the addition of 178.5 MHz spectrum (of which 71.3 MHz is liberalised) in the 850, 1800 & 2100 MHz bands, which all are used for offering 4G services.

While all the debt will remain with the Tatas, Airtel will assume payment of Rs 1,500-2,000 crore, or close to 20% of the Rs 9,000-10,000 crore deferred payments of Tata's unpaid spectrum liabilities to the government. Tatas will pay the rest.

As of end-March, Tata Teleservices and its unit had combined debt of Rs 34,000 crore excluding spectrum liabilities.

All past liabilities and dues will be settled by Tata.

This is the second such big deal in the Indian telecom sector after Vodafone India and Idea Cellular in March this year announced plans to merge their business.

Bharti Airtel-Tata's CMB combined entity will have a market share, in terms of subscribers, to 27-28%, against round 35% of the Vodafone -Idea combined entity. Bharti Airtel has a mobile subscriber base of over 300 million.

Tata Teleservices had a debt of Rs 40,000 crore and the group had been looking to sell off its loss-making mobile business. It has about 5,000 employees.

Airtel will ensure quality services to Tata CMB's customers, while offering them the added benefits of its innovative product portfolio, access to superior voice & data services, mobile banking, VAS and domestic/ international roaming facilities. Tata CMB's operations and services will continue as normal until the completion of the transaction.

The deal is subject to regulatory approvals.

"This is a significant development towards further consolidation in the Indian mobile industry... The acquisition of additional spectrum made an attractive business proposition," Bharti Airtel Chairman Sunil Bharti Mittal said.

The transaction will create substantial long-term value for shareholders given the significant synergies, he said.

Tata Sons chairman N Chandrasekaran said the agreement is the "best and most optimal solution" for the Tata Group and its stakeholders. "We have evaluated multiple options and are pleased to have this agreement with Bharti," he said.

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 employees of Tata will be demerged on the lines of the two businesses ie CMB and EFL (Enterprise and Fixed Line and Broadband), and post an optimal manpower planning will be moved accordingly.

Tata is also in initial stages of exploring combination of its enterprise business with Tata Communications and its Retail Fixed Line and Broadband business with Tata Sky.

Any such transaction will be subject to respective boards and other requisite approvals.

Tata will also retain its stake in Viom, and will take care of the liabilities associated with it. The Boards of Bharti Airtel, Tata Sons, TTSL and TTML have approved the transaction. Goldman Sachs (India) Securities Private Limited is financial adviser to Tata, the statement said.

Bharti Airtel is also in the process of acquiring India operations of Norway's Telenor.

In February, Tata agreed to pay NTT DoCoMo $1.18 billion to buy out the Japanese firm's stake in the telecoms joint venture, settling a long-standing dispute.