Tata Group and Bharti Enterprises are reportedly holding talks over a potential “mega merger” which would see them combine their telecom, submarine cable, TV and enterprise offerings.
The suggested deal would merge Bharti Airtel with Tata Communications, Tata Sky and Tata Teleservices, adding Tata’s collective 53 million mobile subscribers to Airtel’s 280 million. In addition, Airtel would also have Tata’s coveted 800MHz 4G bandwidth at its disposal.
The proposed deal would underline the Indian market’s shift towards consolidation, reducing the number of smaller players to strengthen the position of the three largest, which would be Bharti (combined with Tata), Vodafone-Idea (following the merger of these players) and newcomer Reliance Jio. Airtel is also acquiring Telenor’s Indian unit, having agreed a deal in February that is expected to close within the next year.
Tata would also benefit significantly, as its telecoms arm has been operating at a loss and has incurred debts of roughly INR300 billion ($4.6 billion). The group has reportedly been keen to exit the telecoms sector entirely for several years, having previous held discussions with Vodafone over a potential buy.
However, an unnamed executive from a rival telecoms firm told India’s Economic Times that Tata’s debt represented a hurdle, saying: “Any buyer of Tata Tele would also extract the best value and insist all liabilities are paid up.”
Tata’s debt is not the only factor that could present a challenge to a merger. The firm holds a minority stake in the Indian subsidiary of American Tower Corporation, which is a direct competitor to Airtel’s tower unit, Bharti Infratel. In addition, Tata Teleservices has a unit listed in the Mumbai telecom circle that it would need to delist before a merger could be approved, while Tata Sky has external investors including 21st Century Fox.
Neither Bharti Enterprises nor Tata Group has issued an official statement on the status of their discussions or the potential merger.
Reliance Jio’s market entry last September has prompted rapid consolidation in India, with Vodafone and Idea confirming a merger this year, while Reliance Communications is on track to merge with Aircel by the end of the year. RCom is reportedly also discussing a merger with Tata Teleservices, meaning it could be involved in any future deal between Tata and Bharti.