India: Consolidation wave continues in telecom, Bharti to take over Tata’s consumer mobile biz

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As the consolidation wave continues in the Indian telecom space, market leader Bharti Airtel Ltd today announced that it will take over the consumer mobile business of Tata Sons Ltd on debt-free cash-free basis.

Earlier this year, Vodafone India and Idea Cellular Ltd–the second and third ranked cellular operators– announced their plans to merge operations to create an entity that would have overtaken Bharti Airtel in the number of subscribers.

The merged entity is estimated to have almost 400 million customers, while at the end of July Bharti Airtel had over 280 million mobile subscribers.

The deal includes transfer of all the customers and assets of Tata CMB to Bharti Airtel. Tata Tele has around 45 million subscribers with about 4 per cent share of the Indian mobile telephony market.

Under the terms of the deal, Tata’s Consumer Mobile Businesses (Tata CMB) of Tata Teleservices Ltd and listed entity Tata Teleservices Maharashtra Ltd will merge into Bharti Airtel, which will absorb Tata mobile service operations across the country in 19 circles.

Through the deal, Bharti Airtel will acquire an additional 178.5 MHz spectrum (of which 71.3 MHz is liberalised) in the 850, 1800 & 2100 MHz bands. This is likely to give a boost to its 4G coverage, where it is facing intense competition from  Mukesh Ambani-led Reliance Jio, which has disrupted the market with its low tariffs and attractive incentives.

Jio’s total mobile subscriber base ​at June end ​stood at 123.4​ ​million, since it was launched for its partners and staff in December 2015 and commercially launched in September last year.

While Tata will settle all past liabilities and dues of the two companies, Bharti Airtel will assume a small portion of the unpaid spectrum liability of Tata. The transaction will also provide Bharti Airtel the right to use Tata’s existing fibre network, according to an official release.

“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, Bharti Airtel.

Shares of Bharti Airtel Ltd today closed at Rs 400.05 on Thursday, down 0.8 per cent, on a day the benchmark Sensex rose 1.09%, or 348.23 points, close at 32,182.22 points. While the shares of Tata Teleservices (Maharashtra) Ltd rose 9.95 per cent, to Rs4.42. The news of the merger had come in after trading hours.

The move comes shortly after Tata Teleservices decided to shut down its loss-making telecom operations. 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.

However, Tata will retain its stake in mobile tower company Viom and take care of associated liabilities.

“The employees of Tata will be demerged on the lines of the two businesses i.e. CMB and EFL (Enterprise and Fixed Line and Broadband), and post an optimal manpower planning will be moved accordingly,” according to the statement.

“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,” N Chandrasekaran, Chairman, Tata Sons, said.

Goldman Sachs (India) Securities Private Limited is the financial advisor to Tata.

Tata Tele has been on the block for some time with reports surfacing about possible collaboration with Reliance Jio apart from Bharti Airtel.

Bharti has been on an acquisition spree this year trying to strengthen its position itself as the market leader, as its faces cut-throat competition from Reliance Jio and the proposed merged entity of Idea Celluar and Vodafone India.

In April, Bharti Airtel Ltd agreed to buy Tikona Digital Networks Pvt. Ltd’s 4G business, including its broadband wireless access spectrum and 350 cellular sites in five telecom circles. Prior to this, it took over the Indian operations of Norway’s Telenor ASA to strengthen its presence in the 1800 MHz band. The transaction gave it access to 44 million customers (increasing its user base to 307 million), 43.4 MHz of spectrum in the 1800MHz band and 20,000 base stations.

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