Tata Teleservices mulls rights issue to repay debt

Tata Teleservices, a Tata group company, is planning to go for a rights issue to its shareholders.

While the amount to be raised is yet to be finalised, sources said company promoters have decided to raise money to reduce the debt the company had taken to pay 3G spectrum.

A Tata Teleservices (TTSL) spokesperson declined to comment on the development.

Some of the bigger shareholders of the company such as Tata Sons, NTT DOCOMO and Temasek Holding will participate in the rights issue. A source close to the development said the issue is not expected to change the equity structuring of the company.

Tata Sons has a 60 per cent stake in TTSL, while Japanese company NTT DOCOMO with which Tata has a joint venture for its GSM business, has over 26 per cent stake. Temasek has 9.8 per cent stake and other Tata group companies such as Tata Communications and Tata Power hold minor stakes in the company.

The increased equity capital base of the company will be used by Tata Teleservices to repay some of the debt it has on its books over 3G licences and GSM roll out. Tata paid Rs 5,864 crore to obtain spectrum in nine circles — Maharashtra, Karnataka, Kerala, Madhya Pradesh-Chhattisgarh, Rajasthan, Gujarat, Uttar Pradesh (West), Punjab and Haryana.

Tata Teleservices is not a listed company, but Tata Teleservices Maharashtra Ltd, which comprises of Maharashtra and Mumbai circles, is listed on the stock exchanges.

With a subscriber base of 88 million comprising of both CDMA and GSM consumers, TTSL has a market share of 11.2 per cent in the Indian telecom wireless market and is the fifth largest company in terms of subscribers after Bharti Airtel, Reliance Communications, Vodafone and BSNL.

The company’s CDMA business has presence across 22 circles, while it has a pan-India licence to operate GSM telecom services, and has been allotted spectrum in 18 circles.

TTSL started its GSM operations in 2009, with an extremely competitive one paisa per second tax, which triggered a tax war in the wireless business. The tax war, which intensified with new companies entering the field, brought down average telecom rates across the industry, and reduced the margins of companies across the sector.