A telecom tower (Photographer: Susana Gonzalez/Bloomberg)

Bharti Airtel Agrees To Take Over Tata Group’s Mobile Services Business 

Summary
  • Tata Teleservices’ mobile business to merge with Bharti Airtel.
  • Merger on a cash-free, debt-free basis say companies. Bharti to assume “small portion” of Tata’s deferred spectrum liability.
  • Bharti Airtel to get Tata Tele’s four crore customers, 178.5 MHz spectrum, consumer mobile business employees and right to use Tata fibre network.
  • Tata to retain stake in Viom.
  • Tata to explore combination of its enterprise business with Tata Communications and retail fixed line and broadband business with Tata Sky.

India’s largest telecom operator Bharti Airtel Ltd. will take over the struggling mobile services business of salt-to-software Tata Group as low tariffs and rising debt continue to drive consolidation.

Bharti Airtel will get 4 crore customers and assets of Tata Group’s mobile services business, the companies said in a joint statement. The “debt-free cash-free” merger will see Sunil Mittal-led company take control of operations and a small portion of Tata Teleservices Ltd.’s unpaid spectrum liabilities. It excludes the Tata Group’s stake in tower firm Viom Networks Ltd.

“We believe today's agreement is the best and most optimal solution for the Tata Group and its stakeholders,” Tata Sons Ltd.’s chairman N Chandrasekaran said in the statement.

Finding the right home for our longstanding customers and our employees has been the priority for us. We have evaluated multiple options and are pleased to have this agreement with Bharti.
N Chandrasekaran, Chairman, Tata Sons

The merger allows the group to shed a loss-making business which Chandrasekaran said was “close to impossible for us to recover”. More so when Mukesh Ambani’s Reliance Jio Ltd. has shaken up India’s telecom industry by offering free services and cheaper plans. The country’s newest operator has been gaining share at the expense of smaller rivals like Tata Teleservices Ltd. and Tata Teleservices (Maharashtra) Ltd.

Also Read: What The Numbers Say About Tata Group’s Telecom Business

Reliance Jio has already triggered a spate of mergers as Vodafone India Ltd. and Idea Cellular Ltd. have agreed to combine to create India’s largest operator. Bharti Airtel took over Telenor’s India business and Tikona Networks 4G operations. Anil Ambani’s Reliance Communications Ltd. is struggling to repay debt.

Bharti Airtel will absorb Tata’s operations in 19 circles across the country. That will give the company additional 178.5 megahertz of spectrum and right to use the existing fibre network of Tata, Sunil Bharti Mittal, chairman of Bharti Airtel, said.

The acquisition of additional spectrum made an attractive business proposition. It will further strengthen our already solid portfolio and create substantial long term value for our shareholders.
Sunil Bharti Mittal, Chairman, Bharti Airtel

The deal will make Bharti Airtel undoubtedly the strongest in terms of spectrum holding, said Kunal Bajaj, telecom expert and consultant. With Vodafone and Idea coming together, their spectrum holding is going to balloon and become quite substantial, especially in the 1,800 MW band, he said.

“Tata will be relieved of the cash burn that was happening in its operations. And given the high competitive intensity in the market right now, it would have been difficult for them to survive,” said Nitin Soni, director at Fitch Ratings. It’s a good deal for Bharti as well as they are getting 40 million consumers, a significant amount of spectrum which will help them in future to strengthen their 4G networks and to compete effectively against Reliance Jio, he said.

Employees of Tata Teleservices will be split among two business – consumer mobile, and enterprise and fixed broadband line. Tata is also exploring combining its enterprise business with Tata Communications and retail fixed broadband line business with Tata Sky. It will retain its 32.8 percent stake in Viom Networks valued at Rs 4,526.4 crore and take care of associated liabilities.

Watch Rajan Mathews, director general of Cellular Operators’ Association of India and telecom expert Kunal Bajaj discuss the proposed deal and what it means for the telecom sector.

Also Read: Why Tata Group May Be Looking To Exit The Wireless Business

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