Tata Tele does not have too many options

NTT DoCoMo’s decision to exit does not leave too many options for Tata Teleservices but to be acquired by one of the existing players.

The seventh ranked company by subscribers needs backing from a financially strong investor to stay in the race in a market led by the likes of Vodafone, Airtel, Idea Cellular. Under a huge debt of over ₹23,000 crore, Tata Teleservices has had to cut costs and rationalise investments in a bid to stay afloat.

A far cry from 2009 when an NTT DoCoMo executive Toshinari Kunieda had told Business Line that the Japanese company wanted to acquire more stakes in TTSL but it found the then valuation too high.

But then began TTSL’s slide. According to recent submissions made with the Department of Telecom, Tata Tele’s net worth is now at minus ₹5,346.65 crore. In comparison, market leader Bharti Airtel’s net worth has been pegged at ₹61,221 crore while new player Reliance Jio has a net worth of over ₹5,000 crore.

Over the last 18 months, TTSL bosses have tried to turnaround the company. The strategy revolves around cutting costs, redeploying assets from low growth areas to high growth regions and focus on generating higher revenues from data services.

Two networks One of the main problems at TSSL was that it had to invest in rolling out two parallel networks — one for CDMA and another for GSM.

Sometimes last year, it decided to focus more on GSM. As a result, the company’s GSM business has show growth almost at par with the rest of the industry.

For instance, its average revenue per user from GSM subscribers is at ₹179 a month compared to top four operators’ average of ₹176

Therefore, its GSM business could be an attractive proposition for someone like Vodafone which could use TTSL’s spectrum to offer data services. If that happens, it will create India's largest telecom operator by subscribers.

Further, the GSM operator would be also able to expand its 3G footprint to 15 circles from present 13. Another potential buyer could be Telenor, the Norwegian telecom giant that provides GSM services across six circles under the brand Uninor.

As of March-end, Uninor had a total of 35.61 million users and was aggressively looking at expanding geographical reach and increasing subscriber base.

“We do not comment on speculations regarding future mergers and acquisition opportunities. Uninor’s focus at this time is on investing and expanding in its six circles and launching services in Assam,” Telenor said in an e-mail reply.

Cross-holding norms However, neither of the players can acquire only the stake held by DoCoMo due to cross-holding norms that prevents a single entity from owning stake in two different companies.

“If Vodafone or Telenor buys, it will have to buy the entire TTSL,” said an analyst.