The Tatas will have to invest another Rs 2,000 crore in their loss-making wireless telephony firm, Tata Teleservices, as equity within the next two years to service its loans. This fund infusion will be in addition to the Rs 2,480 crore already invested by the Tatas in January this year, which was used to pay off debt.
Bankers said the fund infusion by promoters was important for the company to repay its debt, which rose to Rs 24,700 crore by December 2013.
“There was a gap of Rs 4,500 crore in servicing the debt, which the promoters have agreed to bring to the table as equity. Tata Teleservices has already received Rs 2,480 crore of this money and the rest is expected in the next two years,” a banker close to the development said.
The January fund infusion was made by the Tatas as compulsorily convertible preference shares, which helped the company meet its interest commitments. In all, the promoters have invested a staggering Rs 25,947 crore in Tata Teleservices till January this year.
An email sent to Tata Teleservices on Wednesday did not elicit any response.
Bankers said the good news was that the operating performance of the company improved in recent months. During the nine months ended December 2013, Tata Teleservices reported a net loss of Rs 3,485 crore on total operating income of Rs 7,895 crore as against a net loss of Rs 3,794 crore on total operating income of Rs 8,190 crore during the same nine-month period of fiscal 2013. The company’s net worth was eroded in fiscal 2013 by Rs 1,860 crore.
Tata Teleservices is 60 per cent owned by Tata Sons, holding company of the Tata group, and another 26 per cent stake is held by Japanese telecom giant DoCoMo.
The rest of the stake is owned by an assortment of corporate investors, including C Sivasankaran.
Following the consolidation of its CDMA and GSM verticals, the company has managed to cut its workforce by 20 per cent apart from reducing its marketing spend by 40 per cent.
As of December last year, the company had a market share of 7.14 per cent, with 63.2 million customers.
Company officials had earlier said that it would look at the merger and acquisition option once the government would come out with new norms.
The company was reportedly in talks to merge its operations with Aircel but that has not been confirmed by either company. There were also reports that Japanese partner DoCoMo, which had the option to sell its stake back to the Tatas before March 31 this year, had agreed to stay invested.