Tata Tele faces winner's curse with strong bid

Wins Mumbai, Maharashtra, Andhra circles for Rs 4,600 cr

Tata Teleservices, the loss-making wireless telephony company of the Tatas, has paid a hefty premium over the winning price for the Mumbai circle which, given its financial health, may turn out to be the winner’s curse, according to analysts.

While Tata Teleservices won the Andhra Pradesh circle with a bid value of Rs 583 crore, its listed subsidiary, Tata Teleservices Maharashtra, made a winning bid of Rs 2,446 crore for the Mumbai circle and Rs 1,590 crore for the Maharashtra circle. The upfront payment for spectrum will be around Rs 2,018 crore for Tata Teleservices Maharashtra and Rs 291 crore for the parent company.

Analysts said with competition from Reliance Jio set to intensify, and other bigger rivals like Bharti Airtel and Vodafone spending heavily on acquiring new customers, the road ahead for Tata Teleservices would be tough.

“The options before the Tatas are either merge the wireless business with a bigger rival like Idea or Bharti or sell to a foreign company that wants to enter India,” said a banker. “As a standalone entity, Tata Teleservices does not have much chance with a five per cent market share even as Jio and Bharti are spending billions,” he added.

As Tata Teleservices paid a premium of 64 per cent for the Mumbai circle, the company would not be left with financial muscle to take on rich rivals, he said.

“The industry has placed its bets largely on data volumes and a disappointment on that front could mean a long phase of losses for all players,” said an analyst. “Tata Teleservices, with its weak financial metrics, wants to stay relevant for acquisition by a bigger rival,” he added.

According to Tata Teleservices’ filings with the regulators, it made a Rs 3,386-crore loss in 2015-16 against a Rs 3,846-crore loss in the previous year. Its revenue was down to Rs 10,708 crore in 2015-16 from Rs 10,965 crore a year ago.

The company had debts of about Rs 30,300 crore at the end of March 2016. Its finance cost for 2015-16 was Rs 2,824 crore. Tata Teleservices recorded its highest ever accumulated loss of Rs 31,500 crore in 2015-16.

Tata Teleservices provides CDMA services in 19 telecom services and GSM services in 18 circles. It has launched 3G services in nine circles.

As on March 31, 2016, Tata Teleservices had a wireless subscriber base of 60.09 million with a market share of 5.81 per cent. The company is reducing its footprint in CDMA and is focusing on providing data services.