Airtel and Tata in talks over potential mega-merger

7 Jul 2017

Bharti Enterprises and Tata Group have reportedly held ‘exploratory talks’ regarding a potential merger of their telecom,direct to home (DTH), enterprise and international cable businesses, as Tata seeks to exit the market, the Economic Times writes, citing several people familiar with the matter. The talks centred around a possible tie-up between Tata’s Tata Teleservices (TTSL), Tata Sky and Tata Communications, and Bharti Enterprises’ Bharti Airtel, including the latter’s wholly-owned DTH arm. A merger would firm-up Airtel’s leading position in the nation’s mobile market by adding just under 50 million subscribers to its books (bringing its total to more than 320 million), whilst granted the operator access to spectrum in the sought-after 800MHz range and augmenting its existing 1800MHz holdings. The enlarged company would also benefit from an expanded fibre-optic cable footprint and would reportedly become a dominant player in the DTH segment.

The prospective deal has numerous hurdles, however, not least of which is the debt burden of more than INR300 billion (USD4.6 billion) shouldered by the Tata Group companies, which Airtel is unlikely to agree to take on. Meanwhile, the deal would have to be agreed by minority shareholders in the Tata Group companies, which include 21st Century Fox, Temasek (both Tata Sky) and the Indian government (Tata Communications). Tata also a minority interest in American Tower Corporation (ATC) India, which competes with Bharti Infratel and Indus Towers (in which Airtel holds a 42% interest) in the telecom tower market.

The talks come as the Indian mobile market is beginning a wave of consolidation, with mergers planned between: Vodafone India and Idea Cellular; Reliance Communications (RCOM), Aircel and Sistema Shyam TeleServices (SSTL); and Airtel and Telenor India. The government is also expected to merge state-owned operators Bharat Sanchar Nigam Limited (BSNL) and Mahanagar Telephone Nigam Limited (MTNL) in the near to mid-term, but no concrete plans to that end have been confirmed. Should the current raft of mergers all be completed (including the prospective Airtel/Tata and BSNL/MTNL tie-ups), the nation’s mobile market would slim down from eleven to five operators with the following market shares (based on subscriber totals at March 2017): Vodafone/Idea, 34.6%; Airtel/Tata /Telenor, 31.9%; RCOM/Aircel/SSTL, 15.3%; Reliance Jio Infocomm (Jio), 9.3%; BSNL/MTNL, 8.9%.

India, Bharti Airtel, Bharti Infratel, Indus Towers, Tata Communications, Tata Teleservices (TTSL, incl. TTML, Tata Tele Broadband)