TTSL aims break-even by FY17 June quarter

Tata Teleservices, the loss-making wireless company from the Tata group, is expected to turn around by the first quarter of the next financial year (FY17) with its operating margins improving to 19 per cent in the first half of FY16 from 8.9 per cent in the year-ago period.

The turnaround in Tata Teleservices' fortune is critical for the group's holding firm, Tata Sons, which has invested close to Rs 4,500 crore in the company's equity in the past two years, said a banker close to the development. The company is expected to receive Rs 2,800 crore by selling its part of stake in telecom tower firm Viom Networks, which is expected to repay its debt worth Rs 32,400 crore.

After the Viom sale, Tata Teleservices would continue to hold a 33 per cent stake in the tower company. Despite 19 per cent operating margins, the company is far behind industry leaders such as Bharti Airtel, Idea and Reliance Communication, which have far higher operating margins. Analysts said Tata Tele's average revenue per user is less at Rs 174 per customer compared with Rs 200 for its rivals.

Apart from the Viom stake sale, Tata Teleservices was also helped by a reduction in termination charges and cost-cutting exercise. The company also scaled down its operations in loss-making circles, but continued to invest in new technology. In the coming weeks, the company is expected to sort out its arbitration case with NTT Docomo to buy back its shares and go ahead with a merger with Telenor of Norway.

An email sent to the company did not elicit any response.

Bankers said though the company's margins have doubled, it will continue to make losses in the medium term. Tata Teleservices made a net loss of Rs 1,420 crore on revenue of Rs 5,390 crore in the first half of FY16, compared to a net loss of Rs 1,960 crore on revenue of Rs 5,430 crore in the year-ago period.

Tata group was one of the first in India to start its wireless telephony services, but failed to make a mark owing to lack of spectrum in many key circles such as Delhi and rollout of CDMA-based services. In the past few years, the company has been shrinking its CDMA-based services and is focusing on GSM-based services. It also made investments worth Rs 5,800 crore to acquire 3G spectrum, which led to its debt rising further.