The deal is in line with the Tata Son’s strategy to do away with businesses, which are a drag on group profitability.
What sounded like a death knell for the 5000+ employees of Tata Teleservices a few days back, just turned off, bringing respite as the company announced a merger with Bharti Airtel. Tata Sons is selling its consumer mobile business to Airtel as part of the group chairman’s strategy to exit businesses which have been lagging behind in terms of profit and showing little promise for the future.
While a few days back, the company was reportedly planning to shut shop, leaving the fate of its 5000 plus employees in the lurch, the decision to get into an alliance with Airtel comes as a relief. This move is not only being seen as a game-changer for the industry on the whole, but will also prove to be a life-saver for Tata’s loss-making telecom arm and its people.
The companies mentioned in a joint statement yesterday that the acquisition of Tata Teleservices has been done on a debt-free, cash-free basis, except for Airtel assuming a fraction of the unpaid spectrum fees that the TaGta group owes to the department of telecommunications (DoT).
Airtel will take over Tata’s mobile phone operations across the country in 19 circles (17 under Tata Teleservices and two under TTML). These circles represent the bulk of India’s population and mobile customer base. The merger is subject to requisite approvals and involves two of the Tata Group companies—Tata Teleservices Ltd and Tata Teleservices (Maharashtra) Ltd (TTML).
For Tata Sons Chairman N. Chandrasekaran, the deal is in line with his strategy to do away with businesses, which are a drag on group profitability. In line with that, he says, “We believe today’s agreement is the best and most optimal solution for the Tata group and its stakeholders. Finding the right home for our long-standing customers and our employees has been the priority for us. We have evaluated multiple options and are pleased to have this agreement with Bharti,” says Chandrasekaran.
The employees of Tata Teleservices and TTML will be divided on the lines of the two businesses i.e. CMB (consumer mobile business) and EFL (enterprise and fixed line and broadband), and will be moved accordingly after optimal manpower planning.
Tata Sons is also in the initial stages of exploring a combination of the enterprise business with Tata Communications and its retail fixed line and broadband business with Tata Sky. Any such transaction will be subject to the approval of the respective boards and other requisite approvals, the companies said in the statement.
Talking of the deal, Sunil Bharti Mittal, chairman of Airtel, says, “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 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,” Mittal adds.