Bharti Airtel and Tata Teleservices deal will be a win-win situation for both sides say industry analysts. The deal will improve the market share of Airtel with no financial burden and minus of any asset, said a report from rating agency Fitch.
"Bharti's credit profile will improve slightly as it's paying no consideration for the operations, which it would acquire free of debt...benefits from the additional spectrum, fibre assets and subscribers will more than offset the additional spectrum liabilities," said the report by Fitch.
The rating agency also said that Airtel's market share revenue will increase by 4-5%, which takes the overall revenue market share to 37-38%. To be noted, the deal between Tata and Airtel is a 'no cash, no debt basis,' deal.
In addition, the Tata deal will give 42 million customers of Tata Teleservices to Bharti Airtel along with its spectrum license in 19 of the 22 circles virtually free. Fitch also said that the "deal will help arrest the decline in Bharti's pretax profit and bolster its 4G spectrum portfolio and network position."
The Fitch report also said that Airtel's earnings will be down by at least 5% in FY18, thanks to the intense price competition and lower mobile termination rates, but the earnings will improve in FY18 with a growth of 3-5%.
As said earlier, Tata's 42 million subscribers will be added to Bharti Airtel subscriber base, which takes the overall customer base of Airtel to more than 300 million. Also, Airtel will gain about 178.5 MHz of spectrum in the 850MHz, 1800MHz and 2100MHz bands in 17 the telecom coverage areas. That said, Airtel will only be able to take over a small part of Tata Tele's spectrum of worth USD 1.5 billion.
"Bharti will take over only a small part of Tata Tele's deferred spectrum liabilities of USD 1.5 billion. We do not expect the transaction to result in any other increase in debt at Bharti," the Fitch report said.