Mega Alliance With the Tatas: Here Are Challenges That Airtel Will Face

Bank of America-Merrill, in a note, said, that Bharti Airtel will face a host of challenges in case it goes ahead with a mega alliance with the Tata Sons. The brokerage said that Bharti Airtel would have to consider over Rs 30,000 crore in debt, and market rate payment of over Rs 11,000 crore for spectrum owned by the latter.

Airtel

Furthermore, the speculated merger would only bring 48 million subscribers of Tata’s mobile service business.

Tata Teleservices has 2.5 MHz of airwaves in the 850 MHz band which are expiring in a few years. Hence it may prove inadequate for Airtel to launch full-scale 4G LTE, the brokerage said, adding the spectrum can be used only for narrow-band LTE. It further stated that Airtel would need to invest $1.7 billion to liberalise Tata Tele’s 1800 MHz spectrum and would also cross the revenue cap in eight circles.

According to media reports, Bharti Enterprises and the Tata Group held exploratory talks to evaluate an alliance involving their telecom, enterprise services, overseas cable and direct-to-home TV businesses. The talks include Tata Sky and Tata Communications.

Currently, Indian government holds 26 per cent stake in Tata Communications, and the company is listed. In case, Bharti goes ahead with the talks; it will have to consider this challenge as well.

However, the brokerage said that the alliance, if goes through, will help the Sunil Mittal-led telco to narrow the gap with the Vodafone-Idea combine in mobile service revenue market, and will help Airtel to emerge stronger in the enterprise and undersea cable business.

Upon completion of the deal, Airtel would have an RMS of 40% on the cellular business front, up from current RMS of 33%. “We know that historically Bharti’s acquisition track record in Indian cellular business with Aircel 4G spectrum, Videocon, Telenor, etc., has been disciplined,” Bank of America-Merrill.

The brokerage said that it would consider this potential merger to be positive for Dish TV, as competition will reduce and the industry would turn into a two-player market with an Airtel-Tata Sky combine commanding 43% of the subscribers and Dish-Videocon controlling 45%.

“We also consider this to be eventually positive for Tata Communications due to market consolidation,” it added. An analyst at the firm said that Tata Communications potentially brings a lot of value to the table by its sizeable intra-city fibre resources, its sub-sea cable system assets coupled with its strong enterprise business which would complement Airtel’s.

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16 Comments on "Mega Alliance With the Tatas: Here Are Challenges That Airtel Will Face"

 

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tri_vis
July 12, 2017 3:10 pm 3:10 PM

Off topic : offers on my Tata DoCoMo sim card in Gujarat circle
1GB3G data for rs. 26 only for 28 days
3 GB 3G data for rs. 76 only for 28 days.

lalit
July 12, 2017 11:02 am 11:02 AM

After buying the 26% stake from Docomo, TTSL are left with a heavy debt of 30K Cr. They have addtional invested 5K cr in operations so they keep going on. Hence they will be selling the stake to Airtel or…

Competition has killed them. Recently their network has not been upto the mark in Mumbai, lots of calls drop.

Airtel has money and wants to be a leader in DTH & telecom space hence TTSL is a good option for them. Analyst feel that unless TTSL loses it debt the deal with Airtel will not go through. Lets see.

Kunal
July 12, 2017 8:30 am 8:30 AM
I don’t see any logic for buying tata tele… ..all new auction spectrum will be available at a discount as the demand has reduced due to consolidation. Band 5 is also getting wasted as 2.5 mhz spectrum is of no use for 4g unless used as narrow band , which will not provide speeds. Airtel will not buy band 5 , as they have already set up network in band 3 & 40. Future may be band 1 will be use for 4g by airtel & latter 900 mhz. In dth business , both are doing good with tata slightly… Read more »
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