Tata Teleservices, more popularly known as Docomo, was in its struggling days for a while now. Despite being the first private operator to introduce 3G in India, the company failed to keep up with the market trends. The situation has come down to Tata wanting to sell the loss-making company off and Bharti Airtel has now agreed to acquire it.
While you might know the company better after Docomo came to India, Tata Teleservices has been in the industry for over 20 years. The consumer mobile business will only be a part of this deal and Tata will still retain the entire debt along with the fixed-line business enterprise operations and its stake in Viom Networks.
As a part of this deal, Airtel will expand its customer base after it will absorb the 40 million Tata subscribers. Airtel will also gain access to the additional 178MHz spectrum that could further strengthen its position in the competitive telecom space. In this ‘cash-free, debt-free’ deal, Airtel won’t be paying anything to Tata.
Bharti Airtel will only be paying a part of the amount that Tata Teleservices owes to the Department of Telecom for spectrum acquisition. Tata Tele’s 5000 employees will also be absorbed by Airtel as this deal completes.
There is no firm date provided by either of the parties by when the deal is expected to close. For the current Tata Teleservices customers that are using the Tata Docomo, T24, or Photon services, their connection will continue to work as normal until the deal closes. Later on, they will be shifted to Airtel’s network where they will have access to better services and newer connectivity options.
NTT Docomo had invested in Tata Teleservices but soon withdrew from the business after selling its stake back to Tata in the wake of heavy losses the company made. Tata couldn’t dispose of the loss-making entity earlier because of an ongoing legal dispute with NTT Docomo. Tata was asked to pay $1.17 billion to NTT Docomo as by compensation by a London tribunal.
The fate that Tata teleservices met today was a result of some major bad decisions that the company and its promoters took. This took one of the oldest telecom companies to a debt of about Rs. 40,000 crore even after Tata Sons has pumped in more than Rs. 50,000 crore over its existence of 20 years.
Bharti Airtel, on the other hand, is on a spree of acquiring all the smaller telecom service providers. Once the deal closes, this would be the seventh acquisition by Bharti Airtel in the past five years. The recent and the major ones include Telenor and Tikona acquisitions. After Vodafone India and Idea Cellular merger, the new entity will become the largest telecom company in India by subscribers count, pushing Airtel to the second spot.