Bharti Airtel will acquire Tata Group's loss-making mobile telephony business, nearly 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.
Mumbai: The Tata Tele-Bharti Airtel deal is positive for both the sides as it will help improve the largest telco's credit profile since its coming with no financial burden and minus any asset, said a report on Friday.
As part of the agreement, Bharti Airtel will absorb Tata CMB's operations in 19 telecom circles (17 under TTSL and 2 under TTML).
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.
Meanwhile, Tata is also exploring combining its enterprise business with Tata Communications and retail fixed broadband line business with Tata Sky.
"This is a significant development towards further consolidation in the Indian mobile industry and reinforces our commitment to lead India's digital revolution by offering world-class and affordable telecom services through a robust technology and solid spectrum portfolio", says Mittal. The customers of Tata will be able to enjoy India's widest and fastest voice & data network, and bouquet of Airtel's best-in-class products and services. Airtel, for which this is the seventh acquisition in five years, will gain access to around 180 MHz of spectrum spread across 850 MHz, 1800 MHz, and 2100 MHz bands. The agreement will further strengthen Airtel's solid portfolio and create substantial long term value for our shareholders given the significant synergies.
"We believe today's agreement is the best and most optimal solution for the Tata Group and its stakeholders".
Tata Sons' chairman Natarajan Chandrasekaran said: "Finding the right home for our longstanding customers and our employees has been the priority for us". Besides, partner NTT DoCoMo too chose to pull the plug from Tata Teleservices.
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.
The companies said the deal is on a no-debt, no-cash basis, implying Airtel is not taking over any of the about Rs 40,000 crore debt with Tata Teleservices and is neither paying any cash.
The deal, however, excludes the Tata Group's stake in telecom towers firm Viom Networks Ltd. Airtel's RMS is also expected to reach 40 per cent in September, a little short of the combined 42 per cent of Idea-Vodafone. Vodafone and Idea, Bharti's immediate rivals, are also about to seal-off a merger.