This merger will be carried out on a debt-free cash-free basis, with one exception: Airtel will have to pay a part of Tata's unpaid spectrum liability to the Department of Telecom (DoT), on a deferred basis.
With the latest merger, customers of Tata will be able to enjoy India's widest and fastest voice & data network, and bouquet of Airtel's best-in-class products and services.
"(It) reinforces our commitment to lead India's digital revolution by offering world-class and affordable telecom services through a robust technology and solid spectrum portfolio", he added. According to the contract, both the companies agreed that all the debt would be paid off by Tata Teleservices and not Bharti Airtel. Buying spectrum, keeping spectrum, getting the right partner, frequent changes in policies, several courter orders, etc. have impacted the telecom business of Tata Group.
The news of acquisition comes amid media reports that Tata Group is mulling to shut down Tata Teleservices, which would have left its more than 5,000 employees unemployed. "It will further strengthen our already solid portfolio and create substantial long term value for our shareholders given the significant synergies", Mittal added further. The telecom liability stands at Rs 54,617 crore which includes Tata Teleservices'debt of Rs 36,667 crore, DoCoMo payout of Rs 8,450 crore and spectrum costs of Rs 9,500 crore. In fiscal 2017, Tata Sons' profit declined 72% to Rs 832 crore on account of its telecom unit. All the assets and customers of Tata Tele will be transferred to Airtel after the deal.
"We believe today's agreement is the best and most optimal solution for the Tata Group and its stakeholders", said N Chandrasekaran, chairman, Tata Sons.
Post the completion of this transaction, the employees of Tata will be separated on the basis of two businesses - CMB and EFL (Enterprise and Fixed Line and Broadband) - and will be moved to either of these businesses later on. Ltd acted as financial advisor to Tata. The second largest player in the game is Vodafone who has a user count of 208 million.
The agreement, signed in 2008, failed to attract enough customers and Docomo triggered an option to sell its stake six years later after incurring losses.