More reports on: Bharat Sanchar Nigam Ltd, Tata Teleservices, Telecom

Airtel likeliest buyer for Tata Tele, BSNL dark horse: survey

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28 June 2017

Bharti Airtel is tipped as the most likely buyer of struggling Tata Teleservices as the Indian telecom sector consolidates into a four-operator market in the next three years, according to a report by London-based CCS Insight, a global mobile and wireless market information and intelligence provider.

The report titled Halcyon Days Ahead in a Four-Operator Market was, according to CCS, published after a survey with 57 telecom M&A influencers. It also details an "intriguing" alternative of Tata Tele merging with state-run Bharat Sanchar Nigam Ltd (BSNL), providing the latter a route to privatisation.

The report, first carried by The Times of India, has been widely published, though Reuters for one warns that it is unable to vouch for its accuracy.

The CCS Insight survey said 68 per cent of the experts (bankers, lawyers and telecom executives with deal-making experience) thought a four-operator market would prevail by 2020. This scenario will have three private providers each with more than 300 million subscribers and one state-owned operator with over 100 million. CCS envisages Tata Tele finding a new home and the Ambani brothers agreeing to combine their two businesses, Reliance Jio and Reliance Communications.

According to TOI, the report coincides with speculation in recent months about Bharti Airtel accelerating acquisition talks after the merger-in-progress between Vodafone and Idea Cellular threatens to dislodge it from the top slot in the Indian market. But a section of the analysts argued there is "little business sense" for Airtel to buy the loss-making Tata Tele.

Tata Tele has revenues of around Rs9,500 crore, but this as well as subscribers are fast depleting. Moreover, the annual payout towards debt servicing is around Rs ,500 crore on total outstanding borrowings of nearly Rs30,000 crore.

Almost half of the respondents in CCS survey said Tata Tele is likely to be subsumed by Bharti Airtel, 22 per cent said a deal with BSNL was possible and 32 per cent said it could merge with another network operator.

"From structuring and approval perspectives, the easiest transaction would be for Tata Teleservices to be subsumed by Bharti Airtel. Our view is that the main alternative is a tie-up with BSNL, but other combinations exist, such as a complex merger with the Reliance Communications-Aircel business," said the report authored by Tony Worthington, a former a former Standard Chartered and ABN AMRO banker who has reportedly been involved with Indian telecom industry since 1995.

"Tata Group has history with state-owned Indian telecom companies. Tata Communications, its international voice and data arm, previously acquired Videsh Sanchar Nigam, a state-owned equivalent company," the report said, adding that a union with Tata Teleservices would also be an elegant method of facilitating BSNL's privatisation.

Worthington wrote that Reliance Jio's impact on other mobile operators has been startling, with assertive moves since its launch. "Given the current state of the market, coupled with the trend toward consolidation, an acquisition by Jio looks inevitable. The newly-merged Reliance Communications-Aircel is the obvious choice. But we are dealing with a complex relationship between two siblings. This emotional factor will be the principal element of any future transaction," the report said.

It will be a spectacular consolidation if the market turns out to be a four-operator game, down from 15 licensed service providers in 2010.





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