What A Potential Deal With Bharti Would Do For Tata And Its Partners
No player would be interested in Tata Teleservices on its own.
Bharti Enterprises Ltd. and the Tata Group are two business houses that have common interests in telecom, direct-to-home television services and submarine cable, and are exploring options to merge their businesses, according to a report by the Economic Times. Talks are in a preliminary stage, added the report.
In an emailed response to BloombergQuint, Tata Sons Ltd. said it doesn’t comment on market speculation.
Tata Teleservices Ltd. and Tata Teleservices (Maharashtra) Ltd. together hold 178.5 megahertz (MHz) spectrum across four bands, including 4G, but most of the bandwidth is under the administered regime. Administered spectrum is allocated to telecom service providers outside of an auction. In the event of a merger or acquisition, the acquirer must liberalise the spectrum or surrender the same to government, according to Department of Telecommunication’s guidelines. Liberalised spectrum allows telecom operators to use any technology to deliver mobile services like 3G and 4G. TTSL’s administered spectrum is also set to expire over the next four to seven years.
The two entities have also been losing customers for the past few months, with nearly a crore subscribers shifting to other operators from October to April, shows the monthly data released by the Telecom Regulatory Authority of India.
.jpg?auto=format%2Ccompress)
Bharti Airtel which is already the country's largest telecom operator has the lowest net debt to EBITDA (earnings before interest, tax, depreciation and amortisation), while TTSL has the highest ratio among peers.
.jpg?auto=format%2Ccompress)
The Sweetners
A merger in the direct to home business makes sense though, with a possible merger between Tata Sky and Airtel D2H creating the country's largest DTH player. Their competitors Dish TV Ltd. and Videocon D2H have recently merged operations.
A merger in the direct to home business would also give Tata Sky's foreign investors 21st Century Fox and Temasek Holdings an exit route, in case they are looking for one.
Another big asset housed under Tata Communications Ltd. another telecom company promoted by the Tata Group is the overseas cable business, which will help Airtel expand its presence in the enterprise space. Tata Communications owns the world’s largest wholly owned submarine fibre network with more than 70 percent of the world’s mobile network operators using these assets.