HOME > BUSINESS > Tata Tele acquisition good for Bharti Airtel – Fitch

Tata Tele acquisition good for Bharti Airtel – Fitch

Bharti Airtel Limited’s (BBB-/Stable) announcement that it plans to acquire the consumer mobile operations of Tata Teleservices and Tata Teleservices (Maharashtra) Ltd (Tata Telecom business) is positive for the deal participants as well as the industry, Fitch Ratings said.

Bharti’s credit profile will improve slightly as it is paying no consideration for the operations, which it would acquire free of debt.

Yesterday, Bharti announced it would take over the spectrum, mobile customers and associated infrastructure of Tata Teleservices in a ‘cash free, debt free’ deal.

Fitch believes the benefits from additional spectrum, fibre assets and subscribers will more than offset the additional spectrum liabilities.

“The deal would help arrest the decline in Bharti’s EBITDA and bolster its 4G spectrum portfolio and network position. Tata Telecom will exit the consumer mobile segment, avoiding future investment requirements and potential further losses,” the ratings agency said.

Bharti will gain about 178.5 MHz of spectrum in the 850MHz, 1800MHz and 2100MHz bands in 17 Indian telecom coverage areas, the right to use Tata Telecom’s extensive fibre network and 42 million subscribers that will add to its existing Indian subscriber base of 281 million.

“We estimate the consumer mobile business of Tata Telecom generated revenue of around USD1.1 billion-1.2 billion and a small EBITDA profit in FY17, compared with Bharti’s revenue of USD14.7 billion and EBITDA of USD5.4 billion. Bharti’s revenue market share will increase by 4pp-5pp to around 37%-38%,” Fitch said.

It said it will treat the deferred spectrum liabilities that Bharti will take over, as future capex instead of debt.

It said it expects that Bharti will take over only a small part of Tata Telecom’s deferred spectrum liabilities of USD1.5 billion.

“We do not expect the transaction to result in any other increase in debt at Bharti. Tata Telecom will not transfer the USD6.2 billion in on-balance sheet debt and will retain its enterprise business, retail fixed-line and broadband businesses, along with its stake in tower operator Viom Networks.

“Tata Telecom will be responsible for the liabilities associated with Viom Networks. The deal is subject to approval from the telecom regulator, Indian courts and anti-trust authorities, and could be completed in the next 12 months,” it added

The deal is part of industry consolidation that has been accelerated by the entry of aggressive new operator Reliance Jio.

Since Jio’s launch in September 2016, the industry has consolidated into three large operators from over 10 participants.

Weaker telcos have had to exit the market by selling their operations to the stronger telcos, which have had to rethink their long-term plans.

During 2016-17, Telenor sold its Indian operations to Bharti, while Videocon sold its spectrum assets to Bharti and exited the industry.

The second- and the third-largest operators, Vodafone India and Idea Cellular, decided to merge to combine spectrum assets, strengthen balance sheets and reduce cost and capex to compete effectively.

Reliance Communications (Rcom, RD) entered into a standstill period with its lenders until end-2017 to provide time for the company to reduce its USD7 billion in debt.

However, it cancelled a deal with Aircel to merge wireless operations, citing regulatory and competitive reasons.

Both Rcom and Aircel are short of sources of capital to trade their way out of difficulties.

As of July 2017, Jio has gained about 129 million customers, in less than a year, though its investment of USD29 billion has been massive.

“Its aggressive pricing strategy means that its revenue market share of 4%-5% is much lower than its subscriber market share but we expect this to rise to more than 10% by 2018. However, we expect that its tariffs will have to rise in the medium term if it is to earn an acceptable return on its significant investment,” it added.

Kotak Institutional Equities pegged the indirect costs of the acquisition, such as increased tower lease and cancellation charges, of around 4,000 cr.

“For an acquisition cost of Rs 4,000 crore, Bharti gets (1) access to spectrum worth Rs 15,000 crore in MTM value and (2) opportunity for some revenue and EBITDA accretion. We believe the current quarterly annualised wireless revenues of TTSL and TTML are around Rs 7,000 crore,” it said.

Airtel stocks rose 8% today, boosted by the acquisition as well as news that Reliance Jio will be raising its tariff from Thursday onwards.

Follow ULTRA.news
Ipca Laboratories acquires US pharma manufacturer for $9.65 mln Ipca Laboratories Ltd said it is has acquired US-based drug manufacturer Pisgah Labs Inc. for US$ 9.65 millions free of debt. The acquisition is aimed at establishing the company's foothold in the US market in the field of contract research and small-volume manufacturing of a...
Idea-Vodafone merger gets NCLT approval The proposed merger between Idea Cellular and Vodafone got the approval of India's National Company Law Tribunal, with the rider that the merged entity will be liable to pay income tax on behalf of Vodafone India in case of a ruling that Vodafone India has to pay the arrears. ...
Reliance Jio unveils 3GB, 5GB daily packs at Rs 509, 799 New Plans After disrupting the market with its 1GB per day plans, Reliance Jio has unveiled new packs targeted at heavy users. Two new plans have been unveiled today that were not present on the company's website earlier -- a 3GB per day plan priced at Rs 509 and a 5GB dai...
Tata DoCoMo offers 1GB daily + free calls at Rs 179 with Airtel 3G Tata DoCoMo, which recently announced that it was moving its customers to Bharti Airtel's network before a merger of the two companies, has started offering unlimited calls and daily data. Even though users won't be able to latch on to Bharti Airtel's 4G network, they can use ...
Reliance Jio unveils 8 new plans, data price falls 32% Reliance Jio has unveiled eight new plans that have brought down the price of 4G data by 32% to Rs 3.56 per GB from Rs 5.19 per GB earlier. The new plans are available from Tuesday and will make most of the the company's existing plans irrelevant (see table below). The new ...
Jio Impact: 4G overtakes 2G in network size in India A single tower often hosts multiple tenants Reliance Jio, the telecom arm of Reliance Industries, has achieved what was considered impossible barely 18 months ago: India now has more 4G base stations than 2G base stations. In other words, 4G service providers in India have...
NIIT acquires US-based corporate training firm NIIT Chairman Rajendra Pawar (center) NIIT Limited, which made a name for itself training millions of Indians with IT skills, said it acquired a US-based corporate training company. NIIT will incur a cost of $8.1 mln (Rs 51.50 cr) over the next five years for the acquisiti...
OrbiMed Asia invests $7.5 mln more in Vivimed Labs unit Vivimed Labs said it will receive $7.5mn investment from OrbiMed Asia into its API business as a follow on to the $42.5 mn invested in September 2017. At the time, Vivimed has said that the proceeds will be utilised for debt reduction at the parent entity level as well as for...
TRAI: India data price rises 22% in Q3; 4G accounts for 80% of data use When Mukesh Ambani launched his telecom venture a year ago, it was based on one key assumption: India is a data starved country, and given the right pricing, demand for the commodity is almost insatiable. Going by the latest industry data from the Telecom Regulatory Authority ...
RCom confirms sale of telecom assets to Reliance Jio An RCom exhibition stall Reliance Jio, the firm led by Mukesh Ambani, will walk away with most of the telecom assets of Reliance Communications, led by Mukesh's brother Anil. Rcom said it has "signed definitive binding agreements with Reliance Jio Infocomm Limited for sale...
Bank of Baroda buys out Pioneer Investments from AMC unit Bank of Baroda said it will buy out its foreign partner Pioneer Investments in its asset management subsidiary to raise its stake in the unit to 100%. It will acquire 51% of Baroda Pioneer Asset Management Company for an undisclosed amount. This is being done due to the ac...
Inter-ministerial group on telecom woes dismissed crisis theory, blamed telcos for high debt The problem of high debt levels faced by some telecom companies in India was of their own making and the government had a limited to role to play in resolving the same, the inter-ministerial group set up to address the concerns of telecom sector found. The cash flow issues fa...
Govt committed to concept of net neutrality – Manoj Sinha TRAI Chairman RS Sharma Telecom minister Manoj Sinha today said the government is committed to the "the fundamental principles and concept of net neutrality" and is studying the recommendations of the telecom regulator in this regard. The government is keen to ensure "non-...
Airtel, Idea & Vodafone to unveil 1GB/day pack at Rs 199 With Reliance Jio unveiling its first monthly tariff plans, all eyes are now on the incumbents -- Bharti Airtel, Idea Cellular and Vodafone -- to see how they will respond. Industry sources believe that the three operators will unveil a new 199 plan which gives 1 GB of data per d...
Reliance Jio launches monthly plans 199 & 299 with 1.2 & 2 GB per day As expected, Reliance Jio has launched its first monthly plans -- Rs 199 for 1.2 GB per day and Rs 299 for 2 GB per day. The plans were anticipated after the newcomer unveiled its permanent plans on Diwali -- more than a month ago. The plans price data at roughly the same ...
BSNL, Reliance Jio testing network tie-up – Minister State-owned Bharat Sanchar Nigam Ltd is currently testing an intra-circle roaming agreement with Reliance Jio in Karnataka circle, telecom minister Manoj Sinha said. However, he did not clarify whether the agreement was to allow BSNL users to tap into Reliance Jio's 4G service...
Tata Teleservices shareholders to get 1 Bharti Airtel share for 2014 held Shareholders of Tata Teleservices Maharashtra Ltd -- the listed unit of Tata Tele -- will get one share of Bharti Airtel for every 2,014 shares held by them, the company said. The ratio of share issue indicates that the consumer mobile business of Tata Telservices Maharashtra...
Bharti Airtel buys Tigo Rwanda from Millicom International Bharti Airtel Limited said it has agreed to acquire 100% of Tigo Rwanda Limited, the local unit of Millicom International Cellular S.A.. Airtel already has operations in Rwanda and the acquisition "will consolidate the Rwandan telecom market and position Airtel as a strong nu...
TV Today to merge Mail Today with itself for synergy Broadcasting company TV Today Network said it has decided to write off nearly Rs 273 cr of accumulated losses at its Mail Today newspaper business and merge it with the parent company for better synergies. TV Today Network runs one of India's most popular television network, i...
Torrent Pharma completes acquisition of Unichem’s branded India business Torrent Pharmaceuticals said it completed its previously announced acquisition of the branded formulation business of Unichem Laboratories for India and Nepal, including its Sikkim manufacturing facility. The deal was signed on 3rd November, 2017. With this, Torrent has ent...