After deciding to sell its mobility business to Bharti Airtel, Tata Teleservices pre-maturely packed up 30,000-odd tenancies for which it will likely pay around $900 million to American Tower Corporation (ATC) as compensation. This step is supposed to make the way clear for the acquisition of Tata’s mobility division by the largest telco in the country – Bharti Airtel. A person aware of the matter said: “The overall compensation will include Tata Teleservices’ 26% stake in ATC-controlled Viom Networks — valued at Rs 4,500-5,000 crore — that ATC will acquire and the additional amount as the cash component.”
Tata’s payment of $900 million is very important since it had made clear with the conglomerate that it would clear up previous dues before proceeding on the terms that Bharti Airtel laid down in the agreement. Presently, Bharti Airtel makes use of the towers of its tower unit Bharti Infratel and Indus Towers, which is its joint venture with Idea Cellular and Vodafone India. Also, when ET threw some questions in ATC’s way the officials gave no response. Tata spokesperson also declined to comment.
During the negotiations, news floated that ATC had demanded a payment of a little more than a billion dollars as compensation for terminating 30,000 tenancies with ATC India and its unit Viom by Tata Teleservices. Also, as per ET’s report, ATC is keenly averse to any compromise on early termination compensation. Given that the bulk of the Tata Tele tenancies were based on long-term master service agreements (MSAs) valid till 2025 with 5-to-7-year lock-in periods, the American giant is surely not too happy about it and is now seeking compensation.
Brokerage firm ICICI Securities had remarked that the exit of Tata Teleservices and Telenor India, which are ATC’s two key clients would have a huge impact on the company since a lot of towers of the latter’s (India) portfolio could take an unexpected turn towards unviability and might be shut down. In such a scenario, ATC likely deemed it fit to give Tata a discount of 10 percent since this would mean an early and smooth settlement with a key client.
In April 2016 ATC acquired 51% in Viom from Kolkata-based Srei group and Tata Teleservices for Rs 7,600 crore. Post the merger, Viom’s 42,000 telecom towers along with its India operations, ATC held a 65% stake in the JV and the Tata’s owned 26%. The remainder is held by IDFC and Macquarie, and then Viom was reframed as ATC Telecom Infrastructure.
On the other side of the deal, according to a person aware of the industry, Tata is also making attempts to fast-track the settlement deal with ATC, since the telco wants to hurry for the acquisition of its consumer mobility business by Bharti Airtel. In the agreement which was signed in last October, it was outlined that Tata Teleservices’ wireless business which measures up to 40 million customers, constituting 5,000 employees and about 178.5 units of airwaves spread in 19 circles will be transferred to Sunil Mittal-led Bharti Airtel in a cash-free, debt-free deal. This deal is expected to increase Airtel’s airwaves capacity by a good chunk.
Also, being the acquirer, Bharti Airtel will help Tata Teleservices pare the debt of Rs 10,000 crore which it owes to the government over the next few years for spectrum acquired in auctions, by helping with Rs 1,500-2,000 crore of the total amount.