Airtel deal will help Tata Sons save Rs7,000-8,000 crore: CFO Saurabh Agarwal

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Mumbai: The Tata group’s plan to merge its mobile telephony business with Bharti Airtel will help it save Rs7,000-8,000 crore, said group chief financial officer Saurabh Agarwal. In an interview, Agarwal explained the rationale behind the cash-free, debt-free deal and the criticality of exiting a haemorrhaging business. Edited excerpts:

Why has Tata Sons opted for this route instead of winding it down?

We chose to merge and it’s a huge cost saving as the closure cost for the size of this business is very large. We will end up saving Rs7,000 crore to Rs8,000 crore which is extremely important for us. Plus we get to keep our telecom tower stake which is also very critical.

From our perspective, a part of our spectrum goes away, our problems go away and our customers and employees find a new home and the whole system thrives.

The equity value in the whole transaction is zero. Whatever value remains in the enterprise business and the amount of money that we need to pump in will be a call that will be taken by Tata Sons and respective boards. This is just an initial announcement.

All this is still evolving. We are in discussions for rest of the businesses. In the next five to six weeks once we sign the shareholder agreement, we will know what kind of capital is required to be infused into the remaining businesses. They will need additional support to pay off the liabilities that both Tata Teleservices and Tata Teleservices Maharashtra have.

What portion of the unpaid spectrum liability will be taken care of by Airtel?

That is something we will figure out as we go along. They (Bharti) will take care of small part of the liability and the rest will be taken care of by us.

How does the move dovetail with the larger consolidation strategy of Tata group?

The telecom business was the first, second and third priority for the chairman (N. Chandrasekaran) from the day he took over.

He met all stakeholders in the industry and everyone was very supportive. There were several solutions and this is what worked finally. Tata Teleservices is not one but three businesses—mobile, fixed line and broad band. Our Enterprise business is doing extremely well and (it is) profitable. There is also no issue with broadband and fixed line businesses.

The consumer mobile business was the only problem—it was subscale and beyond redemption and we had to find a solution. In the light of all the changes in the industry, there was no way we would have survived. This should have been done long back. It took Chandra to come and do it. Now that it’s done, it will give us time and management bandwidth to focus on growth.

Did you also consider doing a separate deal for the spectrum?

It’s all easier said than done. Everything is so complex to execute.

There are no guidelines in India for closing down a business or doing anything of that nature. So it’s not possible to delink one from the other. Spectrum is a national asset, if something has closed down, whether it should continue with the owner is itself a question mark. When Bharti bought Telenor it also took over its spectrum related liabilities fully. But in this case, Bharti is taking it only partially. Can that be considered a better deal in that sense?

Frankly, it is not an inferior deal as compared to Telenor in any way.

Deals are always contextual and it is difficult to say what is a better or worse deal. At the end of the day, I have to see, what is in it for my customers and employees.

For me, it is important to take care of the ecosystem rather than worry about small costs. We are quite excited about the broad band and DTH businesses—we will grow them and we are not exiting the telecom business. We have the wherewithal to take all the pains.

How do you plan to settle liabilities you have towards American Tower Corp. (ATC)?

We will resolve that amicably. We are partners and shareholders. The business is going to Bharti—its not winding down.

They will figure out what the right provisions are. We will all sit down and have a mature discussion.

As shareholders we will figure out a solution. This deal will ensure, ATC continues to be healthy with good cash flows.

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