Tata Group has made a decision to sell its troubled consumer telecom businesses to India's largest mobile services provider Bharti Airtel for an undisclosed sum, making it the latest casualty of the fierce competition in the country's telecommunications space.
On the merger with Tata, Bharti Airtel Chairman, Sunil Mittal said, "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".
"This is a good deal for Airtel and enables them to potentially become very strong and dominant player in data services market", said GV Giri of IIFL.
Bharti Airtel has agreed to take over the wireless business of Tata Teleservices.
The Bharti Board, which met on Thursday afternoon, has approved this transaction.
It was observed that the Boards of Tata Sons, TTSL, and TTML had also given their approval.
Earlier this year, Vodafone India and Idea Cellular agreed to merge their operations to create the country's largest telecom operator worth of more than United States dollars 23 billion (roughly Rs 1,51,153 crore) with 35 per cent market share. Revenues, meanwhile were down 10 per cent to under Rs 10,000 crore. The merger is on a debt-free cash-free basis. "We believe this would be a good fit for Tata Communications and its customers, and help to further strengthen Tata Communications leadership position in this segment", it said. Airtel will only have to pay 15-20 percent of the deferred payment for spectrums.
"It has bank guarantees of Rs 3,700 crore submitted with DoT".
Tata Teleservices will pay off their debt of nearly Rs 34,000 crore which they took from TTML and TTSL.
A Bharti Airtel office building is pictured in Gurugram, previously known as Gurgaon, on the outskirts of New Delhi, India April 21, 2016. Finding the right home for our longstanding customers and our employees has been the priority for us.
The agreement, signed in 2008, failed to attract enough customers and Docomo triggered an option to sell its stake six years later after incurring losses.
NTT Docomo would not have exited from India if Tata Teleservices was a profit making business and did not put pressure on its financials in Japan. Also, the company has mentioned that it is exploring possibilities of combining its Enterprise Business with Tata Communications and its Retail Fixed Line and Broadband business with Tata Sky.
"This merger is pretty much in line with industry expectations". This includes over 40 million customers who would add to Airtel's userbase.
"It's evident disruption is picking up and consolidation is the game of the hour", he said, adding that he expects even more deals in the crowded sector. Not only does Airtel get access to 40 million subscribers, it also gets access to valuable spectrum in 3G and 4G bands for practically zero cost. But if Vodafone and Idea Cellular merger goes through then Airtel will drop down to the second spot.