Bharti Airtel, Tata Teleservices surge up to 10% on merger plan

Shares of telecom companies, Bharti Airtel and Tata Teleservices (Maharashtra), have rallied by up to 10% after Sunil Mittal - owned  Bharti Airtel agreed to take over Tata Group’s mobile services business.

Bharti Airtel, India’s largest telecommunications services provider and Tata, India’s leading conglomerate, on Thursday announced that they have entered into an understanding (“Agreement”) to merge Consumer Mobile Businesses (CMB) of Tata Teleservices (TTSL) and TTML into Bharti Airtel. The acquisition is subject to requisite regulatory approvals.

“As part of the Agreement, Bharti Airtel will absorb Tata CMB’s operations across the country in nineteen circles (17 under TTSL and 2 under TTML). These circles represent bulk of India’s population and customer base,” Bharti Airtel said in a statement.

The merger is being done on a debt-free cash-free basis, except for Bharti Airtel assuming a small portion of the unpaid spectrum liability of Tata’s towards the DoT, which is to be paid on deferred basis, it added.

Tata Teleservices (Maharashtra), RCom, Dena Bank hit 52-week lows

STOCK MARKET - Shares of Tata Teleservices (Maharashtra) and Reliance Communications (RCom) hit their respective 52-week lows on the BSE in an in any other case firm market.

Tata Teleservices (Maharashtra) dipped 15% to Rs 4.25, extending its 18% decline of the last three buying and selling classes, after the media reviews cautioned that Tata Teleservices is in all likelihood to close down its operations this month. The stock is trading close to its 49f67066cd05458a974d4cc1f8ab519f of Rs 4 touched on March 26, 2013 at the BSE.

“Tata Teleservices continues to explore all alternatives in respect of its business given the tough business surroundings in the telecom industry,” the company said in a rationalization on news file on Wednesday, October four, 2017.

At this level, Tata Teleservices has no longer made any firm decision on the way ahead for its telecom enterprise, it delivered.

Tata Teleservices (Maharashtra), in conjunction with Tata Teleservices, spearheads the Tata organization’s presence within the telecommunication region. Tata Teleservices (Maharashtra) is one of the main cell telecom carrier carriers delivering mobile connectivity and offerings to consumers throughout Mumbai and Maharashtra circles.

RCom hit a new low of Rs 16.40, down 3% on BSE in intra-day change. thus far in five trading periods of October, the stock slipped 15% after the merger of RCom’s mobile commercial enterprise with Aircel turned into referred to as off.

On October 1, 2017, RCom announced that the merger agreement of its cell business with Aircel, signed in September 2016, had lapsed, attributable to legal and regulatory uncertainties, interventions through vested pastimes, and delays in the receipt of applicable approvals.

Jio effect: Tata Tele's net worth erodes by Rs 11,650 cr

The woes of Tata Teleservices continue to mount with its net worth eroding by Rs 11,653 crore at the end of the financial year ended March 2017, on rising losses and interest payments.

The company announced a loss of Rs 4,617 crore for FY17, compared to a loss of Rs 2,023 crore in FY16. This is a bad news for its promoter, Tata Sons, which will have to keep investing in the company’s equity so that it can meet its liabilities, bankers said. But, the company’s debt stood reduced almost five per cent from Rs 30,192 crore in FY16 to Rs 28,766 crore in FY17.

Because of the price war in telecom spurred by the entry of Reliance Jio, the Tata group company’s turnover declined to Rs 9,419 crore in FY17 from Rs 10,588 crore in FY16.

The Tata group company is not the only one which struggled during the year. Aditya Birla Group’s Idea Cellular also reported losses of Rs 400 crore, compared to a profit of Rs 2,728 crore in FY16. Sales and profits of the top two players, Bharti Airtel and Vodafone, also declined during the year (See chart).

Bankers said they were not worried about Tata Teleservices’ debt service coverage ratio of 0.18 as Tata Sons always stepped in with funds to pay bank loans. The Ebitda (earnings before interest, taxes, depreciation and amortisation) fell to Rs 1,341 crore in FY17 from Rs 1,700 crore in FY16.

Jio’s launch, in fact, has triggered a consolidation among the current telecom players. Vodafone India, the country's No.2 telecom company in terms of revenues, and Idea Cellular have announced a plan to merge their operations in India, thus becoming the country's No.1 player. Bharti Airtel, India’s No.1 player, has merged smaller player Telenor with itself. Reliance Communications is awaiting the Supreme Court’s approval to merge its wireless telephony business with Aircel, thus reducing its debt by half.

The rising losses of Tata Teleservices may be a dampener for a suitor to buy or merge the company.

READ MORE