The merger will be on a debt-free, cash-free basis and all past liabilities and dues to be settled by Tata, the companies said in a statement.
Tata Sons Chairman N Chandrasekaran had recently conceded that the groups mobile business Tata Teleservices is in a "really bad shape" and that a "tough call" will have to be taken on the business in this financial year. The combined enterprise business segment of Tata Communications and BhartiAirtel are at par when it comes to revenue, but the quality of customers and intra-city cable network of Tata Communications is far wider.
"The merger is being done on a debt-free cash-free basis, except for Bharti Airtel assuming a small portion of the unpaid spectrum liability of Tata's towards the Department of Telecom, which is to be paid on deferred basis", the statements said. But the biggest benefit that Airtel would derive is access to Tata's 178.5 MHz spectrum bands spread across 19 circles.
Post the completion of this transaction, the employees of Tata will be separated on the basis of two businesses - CMB and EFL (Enterprise and Fixed Line and Broadband) - and will be moved to either of these businesses later on.
"Tata and Bharti Airtel will work together to further explore other mutual areas of cooperation, that will be value accretive for both the Groups". Last month Tata Steel agreed to merge its struggling European business with Germany's Thyssenkrupp. With synergies between Tata Communications and Airtel, the two companies could create capacity for almost twice the number of customers that they are now serving, officials add.
The sale of Tata Teleservices is part of Chandrasekaran's larger plan to shed the $103-billion group of stressed assets that are impacting overall profitability. It later exited this business to focus on Tata Teleservices, which was on the CDMA technology platform. However, it finally found it best to find a nest for the business rather than closing it down as the latter has huge ramifications on business ecosystem. Meanwhile, there were talks with other groups as well including Reliance Jio for a possible merger deal. Besides, partner NTT DoCoMo too made a decision to pull the plug from Tata Teleservices.
Arvind Singhal, chairman of retail consultancy Technopak Advisors, said: "Tata Teleservices in any case has hardly been doing much in the past few years and has been a loss-making proposition. We would look to acquire more to scale up the scope and size of the operations", said Saurabh Agrawal, Group CFO, Tata.
The telecom industry believes that Tata Group will shed some employees during the transition of business.
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