Airtel to buy struggling Tata Tele in 'no-debt no-cash' deal

Airtel, for whom it will be the 7th acquisition in five years, will from November 1 take over 4 crore customers of Tata Teleservices Ltd (TTSL) and Tata Teleservices Maharashtra Ltd (TTML) in 19 telecom circles or zones on "a debt-free cash-free basis", the two groups announced in separate but identical press statements.

TTSL and TTML employees in the 19 circles, managing the consumer mobile business, along with 178.5 MHz of spectrum across 800, 1800, 2100 Mhz (3G, 4G) bands would be transferred to Airtel.

While all of the Rs 31,000 crore debt will remain with the Tatas, Airtel will assume payment of close to 20 per cent of the Rs 9,000-10,000 crore deferred payments for the spectrum to the government. Tatas will pay the rest.

With this deal, Airtel will have over 32 crore customers, way below 40 crore users with the merged Vodafone-Idea entity.

"Instead of closing down the consumer mobile business, which would have entailed a much higher cost and involved letting go of employees and vendors etc, we have chosen this route," Tata Group chief financial officer Saurabh Agrawal said.

He said Tatas will retain stake in the tower company, Viom, and explore transferring the enterprise business to Tata Communications and retail fixed-line and broadband business to satellite TV arm Tata Sky.

The board of the two firms will evaluate the opportunity and decide in 4-6 weeks, he said. The struggling mobile consumer business, Agrawal said, "should have been restructured long back" and when new group chairman N Chandrasekaran took over in February, he reached out to people who could help out. Agrawal, who in July joined Tatas from Aditya Birla Group, said closing down the business would have been against the ethos of Tata Group and would have rendered employees jobless.

Through this deal "Tatas have taken all the pain" associated with the business and ensure that business is not shut, employees not sacked and vendors and other trades associated with it are not thrown out of business, he said.

Without giving the exact number of employees being transferred to Airtel, he admitted that the Sunil Bharti Mittal firm may look at optimisation of staff on ground after the merger.

While Bharti Airtel will also have an "indefeasible" right to use for part of the existing fibre network of Tata, TTSL and TSML's consumer mobile business operations and services will continue as normal until the completion of the transaction.

The 19 circles coming to Bharti "represent bulk of India's population and customer base", it said.

Tata and Bharti Airtel will work together to further explore other mutual areas of cooperation, that will be value accretive for both the Groups, the statement said.

"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," said Sunil Mittal, chairman of Bharti Airtel.

Goldman Sachs (India) Securities Pvt Ltd acted as financial adviser to Tata.