Bharti Airtel will acquire Tata Group's loss-making mobile telephony business, nearly for free, boosting its spectrum holding and raising subscriber base while saving the Tatas from the prospect of having to shut down the struggling unit. The deal augmented Airtel's market share by a few percentage points to make it 35 percent and added 44 million subscribers to its customer base.
As part of the agreement, Bharti Airtel will absorb Tata CMB's operations in 19 telecom circles (17 under TTSL and 2 under TTML).
This merger, which is subject to regulatory approvals, is being done on "debt-free cash-free basis", with all past dues and liabilities to be settled by Tata. The statement also said that Tata is working to explore a combination of its enterprise business with Tata Communications Ltd and also its retail fixed-line and broadband business with satellite TV arm 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". Other than paying a small part for the proportionate spectrum charges, Bharti will get Tata Tele's entire mobile business without assuming any additional debt. The agreement will further strengthen Airtel's solid portfolio and create substantial long term value for our shareholders given the significant synergies.
According to Tata Sons Chairman N Chandrasekaran, it was a hard decision to merge.
Tata Teleservices is one of the most awarded that includes Tata Docomo and Tata Photon. Apart from that, this agreement also gives Airtel the right to use Tata's existing fibre network.
The deal, however, excludes the Tata Group's stake in telecom towers firm Viom Networks Ltd.
Bharti Airtel Chairman Sunil Bharti Mittal was quoted by IANS saying, "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". In February, Airtel absorbed Telenor's operations in seven circles - Andhra Pradesh, Bihar, Maharashtra, Gujarat, UP (East), UP (West) and Assam in a similar no cash deal. "It is a win-win deal for both", says Rajan S Mathews, Director General, Cellular Operators' Association of India (COAI) to IANS. But the addition of another 40 million users will not assist Airtel to continue as the number one telecom operator post the completion of Idea-Vodafone deal. However, Tata Sons will have valuable assets left with it after the demerger of the fixed line, enterprise and broadband businesses that are still with Tata Tele. It also needs to be remembered that Bharti Airtel operates on much higher ARPUs compared to Vodafone and Idea and hence the profitability is much higher.