Shadow of uncertainty over Bharti Airtel, Tata group alliance: Report
The discussions are at a nascent stage and there is no certainty regarding the alliance. But if the merger does take place, there are a whole lot of issues that need to be addressed.business Updated: Jul 11, 2017 13:23 IST
Reports of Tata Group and Bharti Enterprises discussions to evaluate a mega alliance involving their telecom, overseas cable and enterprise services, and direct-to-home TV businesses have been emerging. The discussions are at a nascent stage and there is no certainty regarding the alliance.
But if the merger does take place, there are a whole lot of issues that need to be addressed. Bharti Airtel, which will be the bigger partner and has a 40% market share, will have to take on Tata Communications’$4.5 billion debt. And the need for Bharti to spend $ 1.7 billion to pay for the much sought after 1800 Mhz band hat Tata Teleservices owns.
According to a report by Bank of America Merrill Lynch, Bharti’s track record while acquiring companies in the past has been quite “disciplined”. But this particular merger could prove to be a little bumpy, said the report.
As on the Tata front, the question remains as to what will happen to the government’s 26% share in their telecom business.
On the positive side, Bharti Airtel will be able to close the gap between the merged entity of Idea-Vodafone both in terms of numbers of subscribers as well as revenue market share and get access to a ready network.
For the Tata group, the alliance will provide an opportunity to turn their telecom business, which runs into loss right now, into a bigger company.
In September 2016, with the advent of Reliance Jio, the incumbent telecom companies had to implement the same policy of “pay less-get more” to keep up with the competition unleashed by Mukesh Ambani’s company. The three leading telecom companies Airtel, Vodafone and Idea Cellular had to slash tariffs by almost 67%. Falling revenues of existing players saw a consolidation in the telecom sector, with the biggest announcement being the merger of Idea and Vodafone.