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Tata Group and Bharti Enterprises in talks to explore possibilities of a merger

The merger is expected to help solidify the joint company’s position as a leader in telecom and DTH services

The Tata Group and Bharti Enterprises have started exploring the possibility of a merger, which seeks to unite their respective telecom, overseas cable and enterprise services, besides their direct-to-home TV businesses. The merger is intended to combine Tata Teleservices, Tata Sky, and Tata Communications with Bharti Airtel, and if it goes through, will further develop the country’s telecom market, and leave only three major players in it, namely, Idea-Vodafone, Reliance Jio, and the Airtel-Tata joint company.

It will also give Tata an opportunity to get rid of their loss making business by merging with a bigger company, in which, it holds a minority share. In spite of having attempted the same earlier, even having held talks with Vodafone on the same, this was previously not possible due to the over-Rs 30,000-crore debt, and disagreements with previous partner NTT Docomo. Additionally, as a result of the merger, the joint company would also become a dominant leader in the large optic-fibre network and DTH domain, surpassing Dish TV-Videocon, which was expected to take the leading position after their merger falls through.

While Tata Sky holds 23 percent of the subscriber market share, Airtel holds 21 percent, but Tata wins out due to its high-revenue customers and better satellite capacity. Tata and Bharati’s previous attempts at a merger hadn’t yielded success, but after Ratan Tata taking over as Interim Chairman of Tata Sons, the company has been aggressively looking to improve its telecom business, with the settlement with NTT Docomo having been the first step. Several obstacles still remain, however, as not only would the company need to settle its Rs 30,000-crore debt, but also have to delist the Mumbai arm of Tata Teleservices before the merger takes place.

Additionally, the company holds a minority stake in the Indian arm of American Tower Corporation, which is a strong competitor of both Bharti Infratel and Indus Towers, and Tata Sky has a number of external investors such as 21st Century Fox and Temasek, both of which are major issues needed to be dealt with.

Finally, the government is still a stakeholder of Tata Communications or VSNL, as it was called earlier, possessing 26 percent of its equity. This, however, is expected to be resolved when the government divests its shares in the company in the latter part of the year, after the demerger of the surplus land belonging to the company, which should make greatly facilitate the merger. 

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