Tata Teleservices to be Tata Sons subsidiary

Rs 10,000 cr investment by next year.

Fully owned Tata group company Tata Teleservices, which is aggressively rolling out its CDMA mobile services across the country, will soon become a subsidiary of Tata Sons, the group's holding company. Tata Sons currently holds 47 per cent of Tata Teleservices' equity.

Tata Sons is planning to invest some of the proceeds from the nearly Rs 5,000-crore TCS initial public offer into Tata Teleservices.

"Tata Sons is a significant shareholder in terms of equity in Tata Teleservices. We are getting funds from Tata Sons and other Tata group companies that are shareholders. Whether the funds come from the TCS public offer or any other route is immaterial since the funds are fungible. Eventually Tata Teleservices will be a subsidiary of Tata Sons although it may not happen immediately," said a Tata Teleservices executive.

VSNL, the second largest shareholder in Tata Teleservices, will also have to pump in additional funds to maintain its 19.9 per cent equity in the company. In 2002, the VSNL board had approved a plan to take up to a 19.9 per cent stake in TTSL and the money for this was to be invested over seven years.

However, VSNL advanced the schedule for equity investment from the earlier 2007-08 and pumped in Rs 835.8 crore by June 30 this year.

The other shareholder in TTSL is Tata Power. It has decided not to invest any further in the telecom company.

With an ambitious rollout planned across existing and new circles, TTSL will have to step up its investment plans. TTSL will invest Rs 10,000 crore to acquire a pan-India presence by next year. The money for this will come from Tata Sons and consequently TTSL will become its subsidiary.

Since TTSL is a closely held company, its financial results are unavailable. Tata Power's annual report for 2003-04 says TTSL had accumulated losses till March 31, 2004, substantially eroding its net worth.

With the unified licensing policy in place, Tata Teleservices is expanding operations. It currently operates in eight circles --- Andhra Pradesh, Chennai, Gujarat, Karnataka, New Delhi, Maharashtra, Mumbai and Tamil Nadu.

It has also acquired licences to operate in 12 more circles, which include Bihar, Haryana, Himachal Pradesh, Kerala, Kolkata, Madhya Pradesh, Orissa, Punjab, Rajasthan, Uttar Pradesh (east) , Uttar Pradesh (west) and West Bengal.

Lines busy at Bombay House
Expansion needs: With the unified licensing policy in place, Tata Tele needs Rs 10,000 crore to acquire a pan-India presence by next year. Competition from Reliance and GSM players is hotting up

Team Tata gets going: Proceeds from the Rs 5,000 cr TCS IPO will be pumped into the company. VSNL, the No. 2 Tata Tele shareholder, will pump in additional funds

Sitting out: The other shareholder in Tata Tele is Tata Power. It has decided not to invest any further in the telecommunications major