MUMBAI: The telecom industry in India, especially the small operators such as Tata Teleservices, has been facing a debilitating price war since Reliance Jio came onto the scene.
Bharti Airtel is now buying Tata Teleservices’s consumer mobile business in a cash-free, debt-free deal but the latter plans to stay connected with the broadband and landline businesses. The proposed deal will leave out Tata's enterprise, fixed-line and broadband operations.
No doubt, consolidation of this kind is common in the western markets -- for example, Liberty merged its Netherlands cable TV and broadband business with Vodafone's mobile services.
With a subscriber base of 44 million and revenue market share (RMS) of five per cent at June quarter-end, Tata is selling the mobile business to India's largest telecom operator almost for free as part of the chairman’s plan to exit operations which had been a prolonged drag on group profitability.
Tata Sons is also in initial stages of exploring a combination of the enterprise business with Tata Communications Ltd and its retail fixed line and broadband business with Tata Sky. Any such transaction will be subject to respective boards and other requisite approvals, the companies said in a statement.
Airtel’s acquisition of Tata business will give the former spectrum as well as a larger subscriber base so as to vie with Jio and the Idea-Vodafone combine. It will strengthen Airtel’s position as compared to Jio, as the former will get access to 178.5 MHz spectrum (of which 71.3 MHz is "free to trade") in the 850 MHz , 1,800 MHz and 2,100MHz bands.
Tata's enterprise business, which caters to SMEs, could be combined with the listed Tata Communications, which is in a similar space but caters to big corporates.
Airtel will now absorb Tata’s mobile phone operations across India in 19 circles. On merger, Airtel’s subscriber base is expected to expand to 350 million as against the combined Idea-Vodafone's projected 390 million. Airtel’s RMS is also expected to reach 40 per cent in September, a little short of the combined 42 per cent of Idea-Vodafone.
“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,” Airtel chairman Sunil Bharti Mittal said in the statement.
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