Telecom service provider Vodafone India is in initial talks to buy small and loss making rival Tata Teleservices (TTSL).
Vodafone plc of the U.K is flexing its financial muscle in India after finalizing its exit deal with Verizon from the U.S. telecom market for $130 billion. Earlier, Vodafone said it would utilize proceedings of the stake sale in Verizon Wireless for future roll outs. Vodafone had committed around $3 billion in its India Capex (capital spending).
The move will assist Vodafone to enhance mobile market share in India and become the number one mobile service provider, ahead of Bharti Airtel.
TTSL has 7.25 percent mobile market share in India, while Vodafone has 17.9 percent.
Billionaire Sunil Mittal-promoted Airtel has earlier announced its intention to look for telecom assets in the country, the second largest mobile market in the world, behind China. Airtel has the support of Singapore Telecommunications, the single largest shareholder.
Tata Teleservices may not be the right telecom operator for Vodafone considering the financials of TTSL. But its spectrum will be attractive for the British telecom major.
Tata group, which has around 59.45 percent stake in TTSL, has been looking at an exit route from the ailing telecom business. It is not known whether NTT Docomo, the Japanese joint venture partner of Tata Docomo with 26.5 percent stake, will also be exiting from the telecom business in India.
Tata Teleservices poor financials
Deteriorating financial conditions of Tata Teleservices make them a less attractive buy. TTSL made a net loss of Rs 4,858 crore on revenues of Rs 10,859 crore in fiscal 2013. In FY 2012, TTSL clocked net loss of Rs 4,228 crore on revenues of Rs 10,115 crore and Rs 3508 crore net loss on Rs 8,357 crore in FY 2011.
TTSL’s net worth has eroded to – Rs 1,863 crore in FY 2013 from Rs 2,996 crore in FY 2012 and Rs 5,941 crore in FY 2011.
The company’s net debt is another problem. TTSL’s debt increased to Rs 23,491 crore in FY 2013 from Rs 19,299 crore in FY 2012 and Rs 17,651 crore in FY 2011.
Deal boosters
AT&T may consider a bid to acquire Vodafone plc at a later stage. If AT&T buys Vodafone, America Movil, in which AT&T has a minority stake, may look at buying Vodafone India. America Movil is one of the leading telecom operators in Latin America.
No 4G
Interestingly, both TTSL and Vodafone did not participate in the 2010 auction for BWA spectrum, which can be used for rolling out TD-LTE services. Vodafone India CEO Martin Pieters earlier asserted that its decision against bidding for BWA spectrum was the right move.
Vodafone and TTSL (Tata Docomo) share good synergies. Both want to dominate in the mobile Internet space. Both enjoy high ARPU from data business.
The combined entity will have 3G in 15 telecom circles. Currently, both Vodafone and Tata have 3G in nine circles each. Out of this, three telecom circles – Maharashtra, Gujarat and Haryana — will have overlap in 3G. The alliance will assist both TTSL and Vodafone to address government’s norms on 3G roaming.
Baburajan K
editor@telecomlead.com
