In a significant development signalling further consolidation in the Indian telecom industry, Bharti Airtel has entered into a deal to acquire the Tata Group’s loss-making mobile telephony business, nearly for free. The debt-free, cash-free deal (except for Bharti Airtel assuming a small portion of Tata’s unpaid spectrum liability) will see Airtel absorb Tata’s consumer mobile business operations in 19 circles.
The deal seems positive for both operators. For one, it does not increase Airtel’s debt obligation. In fact, the benefits from additional spectrum, fibre assets and subscribers will more than offset the additional spectrum liabilities. The deal may also help arrest the decline in Airtel’s EBITDA and bolster its 4G spectrum portfolio.
For the $100 billion Tata Group, the move marks a respectable exit from the telecom market. TTSL has been incurring losses for many years now and the final blow was delivered earlier this year when DOCOMO finally parted ways with it. The group has been struggling to sell its telecom business and was on the verge of shutting shop to restrict the promoters’ financial exposure, when the deal with Airtel materialised.
Competition in the Indian telecom space assumed a new meaning post the entry of Reliance Jio last year. Feeling the mounting pressure, industry heavyweights Idea Cellular and Vodafone India decided to join forces, while Airtel consolidated its market position through the acquisition of Telenor India’s business and Videocon’s spectrum assets. Industry leaders believe that the sector is steadily inching towards a 3+1 player model, and this new consolidation deal underscores that trend.
As of now, the merger deal is subject to approval from TRAI, the Indian courts and anti-trust authorities. Given the fate of the RCOM-Aircel deal, it is still a wait-andwatch situation.
As for the sector at large, these are definitely very interesting times. The overhaul of the competitive landscape will ensure that eventually, only the fittest will survive and thrive.
