Bharti Airtel Thursday announced it will merge its mobile business operations with that of Tata Teleservices.
As per a release on the exchanges, Bharti Airtel will absorb Tata's consumer mobile business in 19 circles (17 under TTSL and two under Tata Teleservices Maharashtra Limited) and the merger is being done on debt-free, cash-free basis.
Of it's total Rs 10,000-crore liability towards spectrum payment to the DoT, 80 percent will be paid by Tata Tele, according to CNBC-TV18. Airtel will, therefore, assume a small portion, estimated around Rs 1,500-2,000 crore, of the unpaid spectrum liability of Tata Teleservices. Industry experts say the sum is limited considering Tata Tele had not aggressively participated in the last spectrum auction.
The deal will bolster Airtel’s spectrum pool with additional spectrum in the 1,800, 2,100 and 850 MHz bands, all widely used for 4G.
“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,” Sunil Bharti Mittal, Chairman of Bharti Airtel said.
The transaction will also provide Bharti Airtel the right to use Tata’s existing fibre network.
Through the deal Bharti has the potential to tap nearly 40 million Tata Tele customers. Although, experts also point out it may be a tough task to retain all the customers as they tend to drop out of a network as ownership or brand changes.
Tata Sons will take care of the total debt on books of Tata Tele.
On why Tata Sons chose to transact with Bharti at a nominal cost rather than just shutting down operations, industry expert Nitin Sood pointed out shut down would not have augured well on the brand image and would have left thousands of employees without employment. Through the merger, the employees can be absorbed in the merged entity.
Commenting on the deal, N Chandrasekaran, Chairman of 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,” .
"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," Mittal added.Tata is 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. It will also retain its stake in Viom and take care of associated liabilities.