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Friday, 13 October 2017

Bharti Airtel to buy Tata’s mobile business on debt-free cash-free basis

The Tata group is getting out of its loss-making mobile telecom business. Bharti Airtel and the Tatas on Thursday announced that they have entered into an agreement to merge the debt-laden consumer mobile businesses (CMB) of Tata Teleservices Ltd (TTSL) and Tata Teleservices (Maharashtra) Ltd (TTML) into Bharti Airtel. The deal could see over 40 million telecom customers of Tata joining Bharti Airtel and marking further consolidation in the competition-ravaged Indian telecom sector.

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 Telecommunication, which is to be paid on deferred basis. This implies that Bharti Airtel will not take up Rs 40,000 crore debt of TTSL and TTML and get the Tata’s telecom business virtually free. The Tata group was toying with various options, including shutting down the operations of the mobile telephony business in the wake of huge accumulated losses of close to Rs 30,000 crore and debt burden.

As part of the agreement, Bharti Airtel will absorb Tata CMB’s operations across the country in 19 circles (17 under TTSL and 2 under TTML). These circles represent bulk of India’s population and customer base. The proposed merger will include transfer of all the customers and assets of Tata CMB to Bharti Airtel, further augmenting Bharti Airtel’s overall customer base and network. It will also enable Bharti Airtel to further bolster its strong spectrum foot-print with the addition of 178.5 MHz spectrum (of which 71.3 MHz is liberalised) in the 850, 1800 & 2100 MHz bands.

Bharti Airtel will ensure services to Tata CMB’s customers, while offering them the benefits of its product portfolio, access to voice & data services, mobile banking, VAS and domestic/ international roaming facilities. Tata CMB’s operations and services will continue as normal until the completion of the transaction. The employees of Tata will be demerged on the lines of the two businesses — CMB and EFL (enterprise and fixed line and broadband), and post an optimal manpower planning will be moved accordingly.                       
N Chandrasekaran, chairman, Tata Sons, N Chandrasekaran, chairman, Tata Sons, said, “We believe today’s agreement is the best and most optimal solution for the Tata group and its stakeholders. 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.” The boards of Tata Sons, TTSL and TTML have approved this transaction.

“Tata and Bharti Airtel will work together to further explore other mutual areas of cooperation, that will be value accretive for both the Groups. The transaction will also provide Bharti Airtel with an indefeasible right to use (IRU) for part of the existing fibre network of Tata,” said a statement from the Tata group.

The Tatas are also in initial stages of exploring combination of its enterprise business with Tata Communications and its retail fixed line and broadband business with Tata Sky. Any such transaction will be subject to respective boards and other requisite approvals. Tata will retain its stake in Viom, and will take care of the liabilities associated with it, Tata statement said.

Chairman of Bharti Airtel, Sunil Bharti Mittal, said, “This is a significant development towards further consolidation in the Indian mobile industry … 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.”

“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 given the significant synergies,” Mittal said.

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