Telecom exit would cost Tatas $4-5 bn: Mistry

In a letter to Tata Sons directors on Wednesday, former chairman Cyrus Mistry said Tata Teleservices was haemorrhaging and if the Tatas were to exit the business via a fire sale or shut down, the cost would be $4-5 billion. This is in addition to the $1.2 bn payout to Japanese telecom major NTT DoCoMo for exiting the company at a 50 per cent loss.  

By Tata Teleservices’ filings with regulators, it made Rs 3,386 crore of loss in the year ending March this year, from one of Rs 3,846 crore the previous year. Its revenue for the period was down to Rs 10,708 crore in 2015-16, from Rs 10,965 crore earlier. Debt was Rs 30,300 crore at end-March. Operating earnings were Rs 1,732 crore, against a much higher finance cost of Rs 2,824 crore. High debt has kept in the red, with accumulated loss of Rs 31,528 crore.  Mistry added in his letter that the original structure of the DoCoMo transaction raised several questions about its appropriateness from a commercial or prudential perspective within the then prevailing Indian legal framework. “In light of all of this, our strategy over the past three years has been to increase the Ebitda from Rs 400 crore to Rs 2,500 crore, in the hope of being a potential player in consolidation of the industry,” wrote Mistry.

In the past four years, Tata Sons has invested Rs 4,500 crore in the company, so that it could repay loans. However, say insiders, with the company not showing any sign of a turnaround, the Tatas could consider exiting the business. Competition from Reliance Jio is set to intensify; Bharti Airtel and Vodafone are spending heavily on acquiring new customers.