Bharti Airtel, on October 13 agreed to merge with Tata Teleservices Limited (TTSL) and Tata Teleservices Maharashtra (TTML). Under this merger, Tata Consumer Mobile Business (Tata CMB) will be moved to Bharti, and the transaction is subject to requisite regulatory and other approvals and expected to take 6-9 months to fully merge.
According to the agreement, Bharti Airtel will acquire Tata CMB's India's operations in nineteen circles, including the transfer of all assets (including spectrum) and customers, on a debt-free cash-free basis.
"The acquisition will strengthen Bharti's spectrum holdings and add around 40 million subscribers to the company's leading market position in India's highly competitive mobile telecommunications market, a credit positive," says Annalisa Di Chiara, a Moody's Vice President and Senior Credit Officer.
Airtel' subscriber market share is around 23.7%, which doesn't include the base of Telenor, and Tata' share stood at 3.5%, as per Trai's data as of July 2017.
In addition to the subscriber and revenue market share acquisitions, Tata CMB's 178.5MHz spectrum (of which 71.3MHz is liberalized) in the 800, 1800 and 2100 MHz bands across nineteen circles, will bolster Bharti's spectrum footprint, service offering and network coverage. As part of the deal, Bharti will also get the right to use Tata's existing fiber network.
"This is a non-cash deal and although Bharti will take over a small portion of deferred spectrum payments we do not expect it will have a material effect on the company's consolidated leverage. According to the announcement, Tata will retain its stake in Viom Networks, an independent telecommunications infrastructure company, and take care of the associated liabilities," added Di Chiara, also lead analyst for Bharti.
Moody's research agency, in a press statement, also said that the telecom industry in India will remain intense over the next 12-18 months as leading operators- like Bharti Airtel, Vodafone India, and Reliance Jio Infocomm Limited look to protect and grow market share.
"As a result, including the effect of the reduction in interconnect usage charge (IUC) announced in September, we estimate Bharti's leverage will rise higher at year-end March 2018 to around 3.7x -- as compared to around 3.5x for the last twelve months ended June 2017" said the research agency in a press note.