Airtel to acquire struggling Tata Tele on ‘no-debt, no-cash’ basis
Bharti Airtel will acquire Tata Group’s loss-making mobile telephony business, almost for free, boosting its spectrum holding and raising subscriber base while saving the Tatas from the prospect of having to shut down the struggling unit.
Airtel, for whom it will be the 7th acquisition in five years, will from November 1 take over 4 crore customers of Tata Teleservices Ltd (TTSL) and Tata Teleservices Maharashtra Ltd (TTML) in 19 telecom circles or zones on “a debt-free cash-free basis”, the two groups announced in separate but identical press statements.
TTSL and TTML employees in the 19 circles, managing the consumer mobile business, along with 178.5 MHz of spectrum across 800, 1800, 2100 Mhz (3G, 4G) bands would be transferred to Airtel. While all of the Rs 31,000 crore debt will remain with the Tatas, Airtel will assume payment of close to 20 per cent of the Rs 9,000-10,000 crore deferred payments for the spectrum to the Government. Tatas will pay the rest. The telecom sector is in a consolidation mode since the September 2016 entry of India’s richest man Mukesh Ambani’s Reliance Jio, which has given incumbent operators a run for their money through free voice calling and cheap data offers. Jio has gained 12.8 crore subscribers with in a year.
In February, Airtel absorbed Telenor's operations in seven circles -- Andhra Pradesh, Bihar, Maharashtra, Gujarat, UP (East), UP (West) and Assam in a similar no cash deal. Earlier this year, Vodafone India and Idea Cellular agreed to merge their operations to create the country's largest telecom operator worth of more than $23 billion (roughly Rs 1,51,153 crore) with 35 per cent market share.With this deal, Airtel will have over 32 crore customers, way below 40 crore users with the merged Vodafone-Idea entity.
“Instead of closing down the consumer mobile business, which would have entailed a much higher cost and involved letting go of employees and vendors etc, we have chosen this route,” Tata Group chief financial officer Saurabh Agrawal told PTI. He said Tatas will retain stake in the tower company, Viom, and explore transferring the enterprise business to Tata Communications and retail fixed-line and broadband business to satellite TV arm Tata Sky. The board of the two firms will evaluate the opportunity and decide in 4-6 weeks, he said.
The struggling mobile consumer business, Agrawal said, ‘should have been restructured long back’ and when new group chairman N Chandrasekaran took over in February, he reached out to people who could help out. Agrawal, who in July joined Tatas from Aditya Birla Group, said closing down the business would have been against the ethos of Tata Group and would have rendered employees jobless.
Through this deal ‘Tatas have taken all the pain’ associated with the business and ensure that business is not shut, employees not sacked and vendors and other trades associated with it are not thrown out of business, he said. Without giving the exact number of employees being transferred to Airtel, he admitted that the Sunil Bharti Mittal firm may look at optimisation of staff on ground after the merger. “The merger is being done on a debt-free cash-free basis, except for Bharti Airtel assuming a small portion of the unpaid spectrum liability of Tata's towards the Department of Telecom, which is to be paid on deferred basis,” the statements said.
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