Tata's overseas forays tower over home base
More than a fortnight back, just a day before the annual pilgrimage of India's techies at the Nasscom Summit in Mumbai, Tata Communications (TCL) CEO Vinod Kumar let slip out at the company's 10-year celebrations of VSNL acquisition that it was evaluating a takeover of UK-based Cable and Wireless Worldwide (CWW).
"We are in the early stages of evaluating the merits of a potential offer for CWW," Kumar had remarked softly, after jocularly teasing the assembled media that he was hearing about it for the first time from them, when a reporter had posed the question.
Fortunately for Kumar, the assembled entourage of media persons paid more attention to the quip rather than the news. It was an uncharacteristic leak from a senior executive of a group that operates under the cloak of thick, stone walls of Bombay House, Tata Group's headquarters since 1924.Had Kumar's gaffe been caught on by the assembled media, the public disclosure by TCL about its intent to woo CWW for a possible all-cash deal would have come much earlier, compelled by regulatory requirements.
If the all-cash deal goes through - and there's a big if, considering Vodafone Group is the other contender - it would be the first big-ticket buyout for the Tata group since the $2.3 billion purchase of automaker Jaguar and Land Rover from Ford Motors in 2008.
"CWW has a large footprint and has licences and services in several markets. Although it has been struggling in recent times, it has a formidable presence. Tata Communications had a monopoly during the VSNL monopoly days. It may see CWW as an opportunity to respond to the new reality of telecommunications business and become a larger international player," said Mahesh Uppal, director, Com First, a telecom consultancy firm.
CWW, which reported a net loss of £588 million (Rs 4,600 crore) on revenues of £1.07 billion for the half year ended October 2011, has seen its share price react positively to being wooed by both Vodafone Group and TCL. It was quoting nearly a percentage point up on Friday at London, with a market cap of £856.4 million (Rs 6,730 crore).
The Tatas under chairman Ratan Tata have become so overseas oriented with buyouts over the past decade that 58% of its $83 billion revenues now accrue from outside India.
"What in effect these acquisitions imply is that for the Tata group, India is just another market,” said Nischal Maheshwari, head of research at Edelweiss.
Starting from Tetley tea, which it acquired in 2000 for £271 million, the Tata group has spent over $18 billion (Rs 91,000 crore) in overseas acquisitions – the biggest deal being its buyout of Anglo-Dutch Corus Steel in 2007 for $13 billion.
But not of all of them have clicked. The one for US-based Orient Express Hotels was called off unceremoniously, and turns out to be a lemon.
"Basically we have to just sit it out, to see how it goes," Raymond Bickson, MD and CEO, IHCL had earlier told Hindustan Times.