The shakeout in mobile telecom continued as the Tata Group quit the highly-competitive sector after almost 15 years, merging its loss-making consumer mobile business, consisting of Tata Teleservices Ltd and Tata Teleservices Maharashtra Ltd, with Bharti Airtel. 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. The deal outlined on Thursday, dubbed "debt-free (and) cash-free", spares Tata Group the trouble of any potentially drastic restructuring of the money-losing operation. Tata Tele now has a portfolio consisting of consumer mobile business, enterprise business, fixed line business and the broadband business.
"On completion, the proposed acquisition will undergo seamless integration, both on the customer as well as the network side, and further strengthen our market position in several key circles", he added. "The customers of Tata will be able to enjoy India's widest and fastest voice and data network, and bouquet of Airtel's best-in-class products and services", he said. "The benefits from additional spectrum, fibre assets and subscribers will more than offset the additional spectrum liabilities". "It will further strengthen our already solid portfolio and create substantial long-term value for our shareholders given the significant synergies", Mittal added.
According to Tata Sons Chairman N Chandrasekaran, it was a hard decision to merge. "We have evaluated multiple options and are pleased to have this agreement with Bharti".
The Tata Tele deal, coming on the heels of Airtel's buyout of Telenor India and an earlier spectrum trading deal with Aircel, will allow India's top phone company "to make it hard for Jio to continue with its disruptive pricing", Rajiv Sharma, HSBC director and telecom analyst, said in a note seen by ET.
In February 2017, Airtel and Telenor signed an agreement for a merger.
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Tata Teleservices is one of the most awarded that includes Tata Docomo and Tata Photon.
Goldman Sachs (India) Securities Private Limited is financial advisor to Tata.
Currently, the Indian telecom sector is largely governed by three big telecos - Bharti Airtel, Vodafone-Idea and new entrant Reliance Jio Infocomm. It also needs to be remembered that Bharti Airtel operates on much higher ARPUs compared to Vodafone and Idea and hence the profitability is much higher. Tata Group has the appetite to absorb some employees in Tata Communication, Tata Sky and their other operating companies too.
The transaction will also provide Bharti Airtel with an indefeasible right to use part of the existing fiber network of Tata.