NEW DELHI | MUMBAI: Bharti Enterprises has dropped a plan to pursue a mega-alliance with the Tata Group’s telecom, overseas cable and enterprise services, and direct-to-home TV businesses, several people familiar with the matter said.
Sunil Mittal-headed Bharti, burdened with debt of Rs 87,?840 crore at the end of June, will instead focus on strengthening its books through a strategic stake sale in tower arm Bharti Infratel and on closing acquisitions including the takeover of Telenor India as it tackles brutal competition in the market, the people said.
Singapore Telecommunications Ltd., which owns over a third of Bharti Airtel, was keen to cherry pick the enterprise business of Tata Teleservices and Tata Communications and not take on the complexities of such a major “multi-play” buyout involving stakeholders which included public shareholders and the government of India, the people said on condition of anonymity because the talks are in the private domain. Moreover, SingTel felt integrating such a large operation into Bharti would take away from its core focus of winning against the Reliance Jio Infocomm juggernaut.
It was not clear if the Bharti board had rejected a formal proposal. People directly involved said the matter was discussed among the “highest leadership forums of the group.”
Both sides discussed a possible merger between unlisted Tata Teleservices and Tata Sky and listed Tata Communications with Bharti Airtel, including its wholly owned DTH arm. The talks were said to have gathered momentum after N Chandrasekaran took charge as Chairman of Tata Sons, India’s largest conglomerate, in February.
“We keep evaluating opportunities from time to time. However, at this stage there is nothing to report,” a Bharti Airtel spokesperson said in an email. A Tata spokesperson declined to comment. A SingTel spokesperson said the company does not comment on market rumours.
ET in its July 7 edition was the first to report that both sides were in early-stage talks.
“Airtel also doesn’t have the strategic management bandwidth available to pursue a mega-consolidation with a troubled Tata Tele and getting bogged down in the process when it’s fighting a bruising battle with Jio to retain customers,” an industry official said.
While Tata’s enterprise and DTH businesses were considered attractive, they are not priority areas for Airtel, which has a pretty strong enterprise business of its own, they said.
Besides, the frequency of Tata Tele’s spectrum holdings differ from those deployed on the Airtel network. Airtel would have had to pay close to $1.7 billion to acquire Tata Tele’s airwaves and use them for 4G services, a big ask in these times of financial stress, the industry official said.
A merger, though, would have enabled Airtel to close the gap with the Idea Cellular-Vodafone India combine, both in terms of subscribers and revenue market share.
For the Tatas, a combination would have provided an opportunity to fold their loss-making telecom business into a bigger company and become minority investors. The Tatas have been looking to exit the business over the past few years and even held discussions with Vodafone.
Chandrasekaran recently put all three entities in the same cluster, a move that observers saw as a precursor to explore a “big bang solution.” However, debt of over Rs 30,000 crore, shrinking market share and mounting losses remain major drawbacks even if a longstanding dispute with NTT Docomo is settled.
In addition, the merger would have formed a stronger enterprise player with a large optic-fibre network. The Tata-Bharti combine would have dominated the DTH space, leaving Dish TV-Videocon, which is poised to become the market leader after their merger takes effect, far behind.
Both Bharti and the Tatas have previously evaluated deal possibilities in their respective telecom and DTH businesses without any result. The Tatas have also independently reached out to DTH partner Rupert Murdoch’s 21st Century Fox and Temasek to increase their stake.
“The Tatas are desperately seeking an out-of-the-box solution for their larger telecom and media piece. After Bharti, it has to seek out others with similar aspirations like Reliance Jio,” said another official on condition of anonymity.