Airtel-Tata Teleservices merger good for the industry
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The planned merger between Bharti Airtel and Tata Teleservices’ consumer mobile business is a positive for both the deal participants and the industry as a whole, according to Fitch Ratings.
Airtel announced last week that it plans to absorb Tata Teleservices’ consumer mobile business as well as its spectrum assets in the 850-MHz, 1800-MHz and 2100-MHz bands.
Because the merger is being conducted on a cash and debt free basis, with Airtel only required to take on certain additional spectrum expenses, the deal is expected to slightly improve Airtel’s credit profile, Fitch Ratings said.
It is also expected to help arrest the decline in Airtel’s ebitda and bolster its 4G network position.
“Bharti will gain about 178.5 MHz of spectrum in the 850-MHz, 1800-MHz and 2100-MHz bands in 17 Indian telecom coverage areas, the right to use Tata Telecom’s extensive fiber network and 42 million subscribers that will add to its existing Indian subscriber base of 281 million,” Fitch Ratings said in a research note.
“We estimate the consumer mobile business of Tata Telecom generated revenue of around $1.1 billion to $1.2 billion and a small [positive] ebitda in FY17, compared with Bharti’s revenue of $14.7 billion and ebitda of $5.4 billion. Bharti’s revenue market share will increase by 4-5 percentage points to around 37%-38%.”
Tata Group will meanwhile be able to exit the consumer mobile segment, avoiding potential future losses. The group’s consumer mobile business been a drain on the company’s profit for some time. The company plans to retain Tata Teleservices’ enterprise fixed line and broadband business.
Finally, the deal marks another move towards industry consolidation in India’s formerly overcrowded mobile market, Fitch noted.
“[This consolidation] 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,” the company said.
“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.”
Questions & Answers
Q.How will this merger financially benefit Airtel?
How will this merger financially benefit Airtel?
The deal is expected to slightly improve Airtel’s credit profile as it is cash and debt free, with Airtel only taking on specific spectrum expenses. It should also help arrest the decline in its ebitda and strengthen its 4G network.
Q.What assets will Airtel gain from the acquisition?
What assets will Airtel gain from the acquisition?
Airtel will acquire approximately 178.5 MHz of spectrum in the 850-MHz, 1800-MHz, and 2100-MHz bands across 17 Indian telecom areas. It also gains the right to use Tata Telecom’s fiber network and approximately 42 million new subscribers.
Q.Why is the Tata Group selling its consumer mobile business?
Why is the Tata Group selling its consumer mobile business?
The Tata Group is selling its consumer mobile business because it has been a drain on the company’s profit for some time, allowing them to avoid potential future losses in this segment. They will retain the enterprise fixed line and broadband business.
Q.How has the Indian mobile market changed recently?
How has the Indian mobile market changed recently?
The Indian mobile market has consolidated significantly, moving from over 10 operators to three large ones since Reliance Jio launched in September 2016. This has forced weaker telcos to exit or sell operations.