Tata Teleservices posts record Rs 6,166-cr loss

Prepays Rs 1,000-cr loan to Life Insurance Corporation of India to cut finance costs

Tata Teleservices, a joint venture of Tata Sons and NTT DoCoMo, has posted its highest loss of Rs 6,166 crore on revenue of Rs 10,452 crore for 2013-14, showing the crisis the wireless telephony company is facing.

Tata Teleservices had reported a loss of Rs 4,858 crore in 2012-13 on revenue of Rs 10,770 crore even as its net worth eroded by Rs 1,800 crore last year.

Deteriorating financial health over the years led to a Rs 2,480-crore fund infusion by promoter Tata Sons in January, used to repay loans. The Tatas will have to invest Rs 2,000 crore in the company in two years so it can meet its financial commitments, said bankers.

Tata Teleservices pre-paid a Rs 1,000-crore loan to the Life Insurance Corporation of India on May 19 to reduce its finance costs. The loan was paid with a prepayment penalty and an additional interest of two per cent a year for not maintaining the fixed asset coverage ratio from January 2013 to May 2014. An sum of Rs 312 crore was paid by the company to LIC to achieve a yield-to-maturity return of 12.1 per cent on the non-convertible debentures issued.

The massive loss is one of main reasons NTT DoCoMo has exercised its option to sell its 26.5 per cent stake back to the Tatas at Rs 7,200 crore, 50 per cent less than what the Japanese company had paid in 2009.

A mail to Tata Teleservices on the loss did not get any response.

The loss shows the difficult conditions faced by some Indian telcos over the last few years due to the mess over allocating spectrum.

While briefing analysts on April 25, NTT DoCoMo executives cited spectrum as the reason for its exit from India. "We thought things were moving smoothly in the beginning, but the spectrum administration in India was so confusing and was beyond our expectation and totally unpredictable," NTT DoCoMo executives told analysts.

Tata Teleservices' spectrum in three circles was taken back after the Supreme Court in February 2012 cancelled 122 licences handed out in 2008-09 when A Raja was the telecom minister. The court had also fined Tata Teleservices Rs 5 crore for benefiting from the 2G telecom spectrum scam. In Delhi circle, the company was never allotted spectrum, in spite of having paid for it. "Tata (Teleservices) is struggling today to make a profitable business," the NTT DoCoMo executive said.

Meanwhile, Tata Teleservices, with debt of Rs 25,000 crore, has started taking steps to cut costs. After the consolidation of its CDMA and GSM verticals, the company has managed to cut its workforce by 20 per cent, apart from reducing its marketing spend by 40 per cent. Of subsidiaries, its venture with Virgin Mobile is making big losses. In its 2013-14 results, the company announced it had made a provision of Rs 1,500 crore for net diminution in the value of its subsidiaries.

The only good news for Tata Teleservices is its telecom tower company Viom Networks has turned the corner and made a profit of Rs 120 crore in 2013-14, up from Rs 80 crore a year ago. Viom is valued at $4 billion (Rs 24,000 crore) and with its 50 per cent stake in the company, Tata Teleservices is sitting on a good investment.