New Delhi: Tata Sons Ltd has written to the department of telecommunications (DoT) that the dues of its struggling telecom arm, Tata Teleservices Ltd, amounting to ₹10,000 crore and arising out of spectrum-related charges and licence fee would be assumed by either Tata Communications or the parent company itself.
This, Tata Sons expects, will set the ball rolling for the proposed merger of Tata Communications with the enterprise business of Tata Teleservices Ltd and Tata Teleservices (Maharashtra) Ltd. The remaining business of Tata’s telecom arms—consumer mobility business—will be acquired by Bharti Airtel, the company said in October.
Tata Sons tells DoT it will take on Tata Teleservices’ ₹10,000 crore dues
However, the letter does not hold water for DoT, which believes the assurance needs to come as a formal legal document.
“The dues have not been paid yet. The company has given a letter saying that Tata Communications will pay those (Tata Teleservices’) dues and if they don’t pay then it (Tata Sons) will pay. However, the letter does not amount to anything. It needs to come as a legal document (like a guarantee) with a scheme of arrangement clearly stating which entity will bear the liabilities,” a person aware of the development said requesting anonymity.
Moreover, as DoT does not have a direct business relationship with Tata Sons, the effectiveness of the assurance is in question.
“With Tata Sons, DoT does not have the arrangement of licensor and licensee. There is an issue. In what capacity will DoT claim dues from Tata Sons? DoT’s licencees are Tata Teleservices, Tata Communications and Bharti Airtel,” the person cited above said.
Tata Sons and Tata Communications declined to comment on the story while an email sent to Tata Teleservices remained unanswered till press time.
The telecom business has been a thorn in the side for the Tata group, which in October decided to sell the consumer mobile business segment of the two telecom companies to Bharti Airtel virtually for free. Airtel is acquiring the assets on a debt-free, cash-free basis, except for it assuming a fraction of the unpaid spectrum fees that the Tata group owes to the government.
In May, Tata Sons chairman N. Chandrasekaran met telecom secretary Aruna Sundararajan to discuss the closure of Tata Teleservices’ consumer mobile business by sale to Bharti Airtel, as well as Tata Communications’ plan to acquire the enterprise business of Tata Teleservices. The dues will need to be cleared soon also as Airtel is expected to seek the approval of National Companies Law Tribunal for the transaction after which it will need final approval from DoT.
Tata Communications too requires the government’s support as a shareholder to proceed with the acquisition in addition to a later-stage approval from DoT.
The government, which owns 26% in Tata Communications, has to approve the company’s plan by virtue of being a promoter in the company.
DoT could stall Tata Communications’ plan to buy the enterprise business of Tata Teleservices when it comes up for shareholders’ approval unless all government dues are cleared, Mint had reported on 28 May.
Payment of government dues has become a bone of contention between the government and telecom operators as a wave of consolidation has swept through the industry following the entry of Reliance Jio Infocomm Ltd in September 2016.
Smaller operators such as Tata Teleservices, seeing little prospect of survival, have sold their businesses to larger rivals. DoT recently approved the merger of Vodafone India and Idea Cellular only after the companies paid ₹7,200 crore as dues under the merger and acquisition guidelines.