Soaring losses may queer Tata Tele's spectrum pitch

Accumulated sum Rs 31,500 crore in 2015-16

Tata Teleservices, the joint venture between Tata Sons and Docomo of Japan, will have to bid aggressively in the coming auction to win back spectrum in the Andhra Pradesh circle, expiring next year.

But, its high accumulated losses and aggressive bidding by other players could spell trouble for the company even as it is fighting an aggressive tariff war unleashed by Reliance Jio. The company reported highest-ever accumulated loss of Rs 31,500 crore that eroded its net worth completely in the financial year 2015-16.

"The ability of the company to continue operations in mobility would be severely compromised in this circle, if it does not win back enough spectrum," the company said in its regulatory filings for 2015-16. It said winning back spectrum at an affordable price is key to continuing operations in the circle.

According to its filings, Tata Teleservices made a loss of Rs 3,386 crore in the year ending March this year, as against Rs 3,846 crore loss in the previous year.

Its revenue for the period was down to Rs 10,708 crore in FY16 from Rs 10,965 crore reported the previous year.

The company had debt of about Rs 30,300 crore as on March this year.

The government is planning its biggest spectrum sale through auction starting September 29. It will include the airwave that the company fears losing.

"There is a possibility that the auction demand for spectrum will far exceed what becomes available and is put up for auction," said the company in its latest annual report.

"Consequently, bidding could be aggressive by other operators and the company may not be able to acquire the required spectrum at a cost that is supported by its business cases and its ability to fund the spectrum."

According to analyst estimates, the Andhra Pradesh circle constitutes about eight per cent revenue for the company in the area where it is the fourth-largest player.

The Tatas - one of the first to enter the wireless telephony sector - are in a spot over the future of Tata Teleservices, as it does not want to invest perpetually in a business that is witnessing cut throat competition and would require billions of dollars of additional investments.

Its equity partner, Docomo of Japan, has already expressed its interest to exit the company and has taken the Tatas to court in London to enforce it to pay $1.17 billion to exit the company.

The Tata have, in turn, moved the Delhi High Court saying the Indian laws do not allow the Japanese company to exit at a pre-agreed price.

The matter is currently pending. The Tatas initiated talks to merge its operations with Telenor of Norway but the latter has now decided to exit the country.