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Tata’s new boss N Chandrasekaran has found a solution for his loss-making and highly leveraged telecom business, four months after initiating talks with his counterpart at Bharti Enterprises, Sunil Mittal. Tata Teleservices is selling its wireless mobile business to Bharti Airtel, said multiple sources aware.
The business along with its around 4 crore customers will be transferred on a cash free, debt-free basis for some consideration.
Bharti will take on part of Tata’s Rs 10,000 crore spectrum liability as well. Tata Tele has 180 MHz of spectrum across 800,1800, 2100 Mhz (3G, 4G) bands in 19 circles. Bharti will also be signing an indefeasible Rights of Use (IRU) agreement with Tata Teleservices for access to its fibre optic backbone.
The Bharti board is meeting to discuss and accept the proposal. An announcement is due later this evening.
Spokesperson of Tata and Bharti were not immediately available for comments.
Group watchers on both sides believe this could possibly be the beginning of a much larger strategic alliance and consolidation between both sides involving telecom, overseas cable and enterprise services, and direct-to-home TV businesses.
“Contrary to popular belief, Chandra has found a solution or a permanent home for telecom instead of closing the business…his biggest pain point,” said an official on condition of anonymity. “Talks have been ongoing for a few months to explore a strategic partnership. In between, it stalled but got revived in recent days. Both sides have been keen to forge a deeper alliance and this is just the start.”
The enterprise business, however, is not going to be part of this transaction as yet.
Goldman Sachs is the advisor for the transaction.
The acquisition will enable Bharti Airtel, the bigger partner in the alliance, to close the gap between Idea-Vodafone both in terms of numbers of subscribers as well as revenue market share. Airtel has nearly 280 million mobile phone users in India. Airtel will also get access to a ready network including 4G bandwidth in the much-sought-after 800 MHz band along with the fibre backbone
In a recent interaction with ET, the 53-year old Tata group insider who took charge of the corner office eight months back, emphasised that he will not shy away from “tough decisions” to drive agility, increase accountability and ensure high performance. Fixing telecom within this fiscal was his urgent priority.
“Telecom is one of the big problems I have to deal with. We have a debt of Rs 31,000 crore and we are paying huge interest. The mobile business is making loss. I definitely have my priority to solve this and I am on it. As soon as I came in, I looked at the portfolio and made a to-do list that included Tata Teleservices, delinking European and the India business of Tata Steel, and commercial vehicles and passenger cars of Tata Motors, ” Chandrasekaran said.
“In Tata Teleservices, either we will have to sell it or have a graceful exit. These are the two options and I want to complete it this fiscal year. I am working hard on it and that is my goal,” he added.