Airtel to acquire Tata's mobile business: deal explained in 10 points

Terry Joseph
October 14, 2017

Tata Teleservices Limited (TTSL) and Tata Teleservices Maharashtra Limited (TTML) will combine their Consumer Mobile Businesses (Tata CMB) with Bharti Airtel.

After the deal, Bharti Airtel's customer base will go up from 281 million to 321 million, while the revenues will go up by 10 per cent and take the combined market share up to 41.5 per cent of telecom sector revenues.

The merger is done on a debt-free cash-free basis, apart for Airtel assuming a small portion of the unpaid spectrum liability of Tata's towards DoT.

For Bharti - Tata deal, Nitin Soni Director of Fitch Ratings said, "Bharti's credit profile will improve slightly as it is paying no consideration for the operations, which it would acquire free of debt".

Tata Group is now in the initial stages of exploring a combination of its enterprise business with Tata Communications and its retail fixed line and broadband business with Tata Sky. "Tata customers will be able to enjoy India's widest and fastest voice and data network, and bouquet of Airtel's best-in-class products and services". "The benefits from additional spectrum, fibre assets and subscribers will more than offset the additional spectrum liabilities". The agreement will further strengthen Airtel's solid portfolio and create substantial long term value for our shareholders given the significant synergies. "Finding the right home for our longstanding customers and our employees has been the priority for us", Tata Sons chairman N Chandrasekaran said. "We do not expect the transaction to result in any other increase in debt at Bharti", it said. Besides, partner NTT DoCoMo too chose to pull the plug from Tata Teleservices.

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Goldman Sachs (India) Securities Private Limited is financial advisor to Tata. Apart from that, this agreement also gives Airtel the right to use Tata's existing fibre network. There will be over 40 million consumers joining Airtel with this merger.

Tata will retain its stake in Viom Networks and take care of associated liabilities.

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. According to speculations, TTSL either needed to exit the industry or being merged with another entity.

"The employees of Tata will be demerged on the lines of the two businesses ie CMB and EFL (Enterprise and Fixed Line and Broadband), and post an optimal manpower planning will be moved accordingly", it added.

With the Vodafone India-Idea Cellular merger, they are no more companies in a position to consolidate further as they already have a big enough business to look after.

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