Even as the telecom industry is undergoing a huge wave of consolidation, Bharti Airtel and Tata Group announced that they have entered into an understanding to merge Consumer Mobile Businesses (CMB) of Tata Teleservices Limited (TTSL) and Tata Teleservices Maharashtra Limited (TTML) into Bharti Airtel. According to a company statement, the merger is being done on a debt-free cash-free basis, except for Bharti Airtel assuming a small portion of the unpaid spectrum liability of Tata’s towards DoT, which is to be paid on deferred basis. We bring to you five key takeaways from the deal, and what the deal means to consumers-
Mutual Benefit for Bharti Airtel and Tata Teleservices
In a joint statement on Thursday, the two telecom majors said that “will work together to further explore other mutual areas of cooperation, that will be value accretive for both the groups”. Notably, both the players have significant reach in DTH cable and overseas cable businesses, and could go in for further strategic alliances in these areas.
‘3 plus 1” players in Telecom Industry
As Sunil Bharti Mittal and Gopal Vittal pointed out in the recently concluded India Mobile Congress, India could be a market of 3 major players of the Idea-Vodafone combine, Bharti Airtel and Reliance Jio, plus the state-run BSNL. “India will be a market of 3+1 operators, the telecom sector offers a lot of growth potential,” Sunil Bharti Mittal had said during the event of India Mobile Congress. In an interview to ET Now, Gopal Vittal, the chief executive officer of Bharti Airtel said recently “ In the next 12-18 months, we’ll probably be left with only three operators plus BSNL from the current eight players, which is a good thing as this industry needs a lot of investment.” According to him, it will help the telecom industry to cope up with the growing stress in telecom industry.
Better services for customers
In an interview to ET Now yesterday, Rajan Mathews, Director General Cellular Operators Association of India (COAI) said, “This is certainly good news for the consumers and certainly for Tata consumers because now they have a very defined path forward with one of the leading operators in the country. They should see an enhancement in the quality of the service that they have. It is very clearly sort of positioned for the benefit of the consumer,” adding, “This should be good news for the consumers who can now start getting the benefits of 4G LTE which is a dominant technology that is being provided by Airtel.”
Jump in Bhati Airtel’s subscriber base
According to Goldman Sachs, Tata Teleservices had a subscriber base of 44 million and revenue market share (RMS) of 5% at the end of the June quarter. With this deal, Airtel’s overall subscriber base is now expected to increase to as much as 351 million as against the Vodafone-Idea combined consumer base of around 391 million. The acquisition will also bolster Airtel’s position vis-a-vis Reliance Jio, as Airtel will get access to 178.5 megahertz (MHz) spectrum (of which 71.3MHz is liberalized or free to trade) in the 850MHz , 1,800MHz and 2,100MHz bands, and help it strengthen its 4G coverage. “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 of Airtel, said in the statement.
Good news for employees of Tata Teleservices
Ranjan Mathews of COAI pointed out in an interview to ET Now yesterday, “It is also good for the employees. We were obviously unsure what would happen to the large number of employees but again this should be good news for the employees of Tatas as well. So, all around good news.” Earlier, it was reported that Tata Teleservices is preparing an exit plan for most of its 5,000-odd employees, which includes a notice of three to six months, severance packages for those willing to leave earlier, a voluntary retirement scheme (VRS) for elders, while transferring only a small part of its employees to other group companies.