The merger of Tata Teleservices into Bharti Airtel will not result in any cash outgo from Bharti Airtel, the company said in a statement. In the consolidation phase, only the biggest telecom companies would be able to survive in the market. The new entrant Reliance Jio has fast grown to 130 million customers since its launch previous year.
Tata Group, which is known for doing business transparently, could not manage telecom regulatory policies of several decision makers in the recent governments. The current employees of TTSL and TTML will be demerged across the CMB business and the EFL (Enterprise and Fixed Line and Broadband) business, and are expected to be moved within the Tata Group at a later date.
Its parent, salt-to-software conglomerate Tata Group, is also in the middle of a restructuring exercise to improve profitability and cut its complex structure under its new chairman N. Chandrasekaran.
Only in March, the Tata group and Japan's NTT Docomo finally resolved a row over a foundering telecom venture.
The Karbonn A40 Indian phones come with a retail tag of 3,499 rupees, but Bharti Airtel customers can buy them for an upfront payment of 2,899 rupees and receive cashback of 1,500 rupees.
"It's evident disruption is picking up and consolidation is the game of the hour", he said, adding that he expects even more deals in the crowded sector.
A deal to combine debt-laden Reliance Communications' wireless unit with rival Aircel fell apart this month. However, reports of Tata's trying to sell their mobile business to other competitors including Bharti Airtel were also doing rounds, but these reports didn't receive much media attention.
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 statement said.
Goldman Sachs (India) Securities Private Limited is financial advisor to Tata. Means, Bharti Airtel will not take care of TTSL's existing debts - a whooping Rs 30,000 crore, and Tata's themselves have to settle it. "They were not profitable and to make it profitable, they had to spend enormous amount of money".
Bharti Airtel will acquire Tata Group's loss-making mobile telephony business, nearly for free, boosting its spectrum holding and raising subscriber base while saving the Tatas from the prospect of having to shut down the struggling unit. The team of Bharti Airtel is said to be discussing the deal internally and might announce it officially later today or tomorrow.