Telenor, Tata Tele merger talks reach final stages

Tata to become a minority partner in merged entity

The Tata group and Norway’s Telenor Group are likely to merge their wireless telephony operations in India, with Telenor running the day-to-day business of the merged entity. Considering the valuations of both companies, the Tata group will end up with a minority stake in the merged entity.

According to a person with direct knowledge of the talks, the final contours of the transaction are being discussed by the senior officials of Telenor and Tata Sons in London this week.

The person said both the companies were waiting for the Indian government to come out with its merger and acquisition policy after the ongoing telecom spectrum auction, before making an announcement in this regard.

When contacted, a Tata Sons spokesperson said: “We do not comment on such matters.” A Telenor spokesperson said: “As a principle, Telenor Group never comments on rumours and speculation.”

The Tatas have invested Rs 26,000 crore in Tata Teleservices’ equity; the company has debt of Rs 24,000 crore. The Tata group has sought the government’s permission to buy back NTT DOCOMO’s 26.5 per cent stake in Tata Teleservices for Rs 7,200 crore, at Rs 58 a share. Tata Sons had engaged Price Waterhouse to value its stake in Tata Teleservices and according to a report by Price Waterhouse, the fair value of Tata Teleservices shares stood at Rs 23.34 apiece. The source quoted earlier said the merger with Telenor would take place at about this valuation.

Currently, the issue of the buyback is pending with the finance ministry.

In India, Telenor has permits for mobile services in seven of the 22 telecom service areas; as of now, it operates across six —Andhra Pradesh, Bihar, Gujarat, Maharashtra, Uttar Pradesh (East) and Uttar Pradesh (West). The company posted an annual operating profit of Rs 855 crore for 2014, while revenue rose 36 per cent to Rs 4,070 crore from Rs 3,001 crore in 2013.

For the quarter ended December 2014, the company’s operating loss more than doubled to Rs 276 crore, compared with Rs 132 crore in the corresponding quarter of the previous year, while revenue rose 38 per cent to Rs 1,151 crore. The company added 2.3 million subscribers during the quarter, with an overall base of 36.6 million at the end of 2014.

Tata Teleservices, along with its listed associate Tata Teleservices (Maharashtra), provides CDMA technology services across 19 telecom services and GSM services in 18 circles. It has launched 3G services in nine circles.

As of September 30, 2014, the company had a total subscriber base of 55.42 million, even as it is slowly exiting the CDMA business.

The company incurred a net loss of Rs 6,166 crore on a total operating income of Rs 10,484 crore in FY14, compared with a net loss of Rs 1,858 crore on an operating income of Rs 10,799 crore in FY13. For the first half of FY15, the company reported a net loss of Rs 1,956 crore on an operating income of Rs 5,418 crore, against a net loss of Rs 2,328 crore on an operating income of Rs 5,269 crore during the year-ago period.