Tata Group and Bharti Enterprises are discussing the prospect of bringing together their telecom, overseas cable and enterprise services as well as their TV businesses, as part of a “mega alliance”, The Economic Times (ET) reported.
The merger would combine Bharti Airtel with Tata Teleservices, Tata Sky and Tata Communications. The move would mean Airtel’s 280 million user base would be added to Tata’s 53 million mobile phone users, and Airtel would also gain access to 4G bandwidth in the coveted 800MHz band.
A merger would further consolidate the Indian market, bringing the number of mobile operators down to three main players (the other two being Idea-Vodafone and Reliance Jio). Bharti Airtel agreed an acquisition of Telenor’s India business in February, which is expected to be finalised within 12 months.
As for Tata, it would be able to get rid of its telecoms arm, which is making a loss and has debt of around INR300 billion ($4.6 billion). The ET report said the group wanted to quit the business for the last few years, and had in the past also held talks with Vodafone.
Despite the potential benefits of a Bharti Airtel merger with Tata Group, a rival telecoms executive told ET the telecom company may be unwilling to take on the debt: “Any buyer of Tata Tele would also extract the best value and insist all liabilities are paid up,” the newspaper stated.
When Ratan Tata took over as interim chairman in 2016, sources said “finding a resolution for the telecom business” was a priority for the group, but added discussions are still at a preliminary stage.
The companies themselves have not issued official statements regarding the report.
A merger may be complicated by many factors. For instance, Tata holds a minority stake in American Tower Corporation’s Indian arm, a competitor of Bharti Infratel. Tata Sky has external investors such as 21st Century Fox, plus Tata Teleservices has a listed arm in the Mumbai circle which would need to be delisted.
In March, India had 11 operators, but the sector is in the midst of rapid consolidation as intense competition and rising debt levels forced smaller players to rethink their India investments.
The round of consolidation saw Vodafone India and Idea Cellular finalise a merger, while Reliance Communications (RCom) and Aircel are set to complete a tie-up by end-2017. RCom reportedly also entered into talks with Tata Teleservices, which would bring the company into the merger.