Merger with Tata to help Bharti Airtel close gap with Vodafone-Idea

MUMBAI: Debt-laden Tata Teleservices Maharashtra shares shot up by 17% to close at an over one month high at Rs 8.56 a day after ET reported that the Tata Group and Bharti Enterprises have held exploratory talks to evaluate a mega alliance involving their telecom, overseas cable and enterprise services, and direct-to-home TV businesses.

While the stock of Tata Teleservices Maharashtra closed at Rs 8.56 a piece, that of Tata Communications rose 2% to a high of Rs 689.45 a piece in the early trading hours of the day but lost momentum later. It closed at Rs 667.95 , down 1.14% from previous close.

Shares of India’s largest telecom operator Bharti Airtel , the other party in this merger dropped at around 10 am to Rs 382 a piece as people were a bit cautious about buying a debt laden company, but recouped losses to end higher on overall synergy benefits and bargain buying. However, by the end of the trading hours it rose again to close at Rs 384.65 , up by 0.85% on the BSE.

“If the deal takes place, it will benefit Airtel which needs to have a more integrated portfolio and a larger bandwidth of resources. It is also to be seen how the Tata Group will integrate into this deal . The Tatas have been lagging behind in the telecom sector and this synergy will work in the long run,” said Deven Choksey, MD of K R Choksey Shares and Securities.

The discussions are still at a preliminary stage and there is no certainty that this will lead to any deal. But if the alliance does fructify, it will consolidate the Indian telecom market still further, and narrow the field down to three main players: Idea-Vodafone, Reliance Jio, and the Airtel-Tata combine.

According to the ET story, the merger will enable Bharti Airtel, the bigger partner in the alliance, to close the gap between Idea-Vodafone both in terms of numbers of subscribers as well as revenue market share . Sunil Mittal owned Bharti Airtel has about 280 million mobile phone users in India while Tata Teleservices has around 48 million. Airtel will also get access to a ready network including 4G bandwidth in the much-sought-after 800 MHz band.