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Tata Teleservices Limited

Tata Teleservices (TTSL and TTML) are in the process of merging their consumer mobile business (CMB) with Bharti Airtel (and Bharti Hexacom). Shareholders of Bharti Airtel have approved the merger on August 2018. The meeting was convened by Airtel following direction of the principal bench of the National Company Law Tribunal, at New Delhi. The deal is on a no-debt, no-cash basis, implying Airtel is not taking over any of the about Rs 40,000 crore debt of Tata Teleservices and is neither paying any cash, except for Bharti Airtel assuming a small portion of the unpaid spectrum liability of Tatas toward DoT, which is to be paid on a deferred basis. The deal, subject to regulatory approvals, will see over 40 million customers of Tata Teleservices (TTSL) and Tata Teleservices Maharashtra (TTML) joining Bharti Airtel.

The proposed merger will include transfer of all the customers and assets of Tata CMB to Bharti Airtel, further augmenting Bharti Airtel’s overall customer base and network. It will also enable Bharti Airtel to further bolster its strong spectrum footprint with the addition of 178.5 MHz spectrum (of which 71.3 MHz is liberalized) in the 850, 1800, and 2100 MHz bands. Bharti Airtel will ensure quality services to Tata CMB’s customers, while offering them the added benefits of its innovative product portfolio, access to superior voice and data services, mobile banking, VAS, and domestic/international roaming facilities. Tata CMB’s operations and services will continue as normal until the completion of the transaction.

Tata and Bharti Airtel will work together to further explore other mutual areas of cooperation, which will be value accretive for both the groups. The transaction will also provide Bharti Airtel with an indefeasible right to use (IRU) for part of the existing fiber network of Tata.

The employees of Tata will be demerged on the lines of the two businesses, that is, CMB and EFL (enterprise and fixed line and broadband), and post an optimal manpower planning will be moved accordingly.

Tata is also in initial stages of exploring combinations of its enterprise business with Tata Communications and its retail fixed line and broadband business with Tata Sky. Any such transaction will be subject to respective boards and other requisite approvals.

Tata will retain its stake in Viom, and will take care of the liabilities associated with it. The boards of Tata Sons, TTSL, and TTML have approved this transaction. Goldman Sachs (India) Securities Private Limited is Tata’s financial advisor.

In the meantime, TTML has received approval from its shareholders and promoters to raise up to Rs 20,000 crore, through debt instruments. This is mainly for repayment of debt.

2017-18

The company reported total revenue of Rs 5325 crore during the year, a 43.8 percent decline over the previous year. It reported a 178.3 percent fall in EBITDA at Rs 901 (negative) crore as against Rs 1150 crore in the previous year. The EBITDA margin also reduced to 17 percent (negative) from 12 percent in the previous year. The company’s loss before exceptional items was Rs 4871 crore as compared to last year’s loss of Rs 3649 crore. It recorded exceptional items of Rs 12,759 crore which include, inter alia, provision for impairment of intangible assets and provision for diminution in value of investment in its associate TTML. The reported net loss was Rs 17,630 crore.

Key developments. The last fiscal had seen several factors in both the environment and strategic direction of the businesses impact its operations. The recent consolidation in the industry and the continuing price wars have had a substantial negative impact on the revenues and profitability of the company. During the year, the company was focusing on containing losses even at the cost of lower revenues and growth in the mobility business. Operations were being scaled down where those were not financially viable. There were employee redundancies several times during the year. Voluntary separation schemes were made available to certain employees several times during the year. The market speculation on the future of the company had negative impact on the sentiments including those of employees and customers which negatively impacted the business. Shut down of operations by other operators impacted some of the wholesale revenue streams. The proposed Bharti transaction, signed in October 2017, shifted mobility focus back to revenue sustenance and value creation. The shutdown of the network as wireless operations moved on to an ICR arrangement with Bharti reduced the reach and spread of the network impacting the enterprise business as well. Attrition was high at 34 percent, as against 27 percent last year.

1QFY19

TTML’s total comprehensive loss narrowed to Rs 454.46 crore for the 3 months ended June 30, 2018. The company, whose accumulated losses have exceeded its paid up capital and reserves, said in a regulatory filing that it has secured a support letter from the promoters, indicating their willingness to organize for any liquidity shortfall in meeting financial obligations and repayment of debt.

Exceptional items during the quarter comprise restructuring cost of Rs 90.30 crore (Rs 135.04 crore in the preceding March quarter and Rs 264.30 crore for the last fiscal).

Revenue from operations came to 39.5 percent lower at Rs 334.45 crore for the June quarter compared to Rs 553.09 crore in the year-ago period.

TTML has received its board’s approval to raise additional fund of Rs 20,000 crore through debt instruments. This is mainly for repayment of debt.

“We believe this 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

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