Tata Group's telecom arms - both Tata Tele (TTSL) and Tata Teleservices Maharashrta (TTML) will now be merged with Bharti airtel. The current employees of TTSL and TTML will be demerged across the CMB business and the EFL (Enterprise and Fixed Line and Broadband) business, and are expected to be moved within the Tata Group at a later date. The deal will also bolster Airtel's spectrum pool with additional 178.5 MHz spectrum in 1800, 2100 and 850 MHz bands, which it will receive from Tata as part of the deal.
The transaction will be done on a "debt-free cash-free" basis, the companies said in their joint statement, although Bharti Airtel will take over a "small portion" of Tata's unpaid spectrum liabilities.
"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", said Sunil Bharti Mittal, chairman, Bharti Airtel. Although the acquisition will be done on a debt-free cash-free basis, but this still marks one of the biggest deals in Indian telecom history and also Tata's unceremonious exit from mobile business.
What are the advantages that Bharti Airtel and Tata Teleservices will see post-merger? The telecom liability stands at Rs 54,617 crore which includes Tata Teleservices'debt of Rs 36,667 crore, DoCoMo payout of Rs 8,450 crore and spectrum costs of Rs 9,500 crore.
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According to July data from the Telecom Regulatory Authority of India, Bharti Airtel led the local market with over 281 million customers, while Tata Teleservices stood at eighth place with just 42.9 million subscribers. "It will further strengthen our already solid portfolio and create substantial long term value for our shareholders given the significant synergies", Mittal added further.
"We believe today's agreement is the best and most optimal solution for the Tata Group and its stakeholders", said N. Chandrasekaran, chairman of Tata Sons. In fiscal 2017, Tata Sons' profit declined 72% to Rs 832 crore on account of its telecom unit. Finding the right home for our longstanding customers and our employees has been the priority for us.
Goldman Sachs (India) Securities Pvt Ltd acted as financial adviser to Tata. This will fall short of Vodafone-Idea's combined 395 million users when those two companies merger comes through. Merging with Tata Tele, Airtel will have more than 320 million customers.
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.