"Instead of closing down the consumer mobile business, which would have entailed a much higher cost and involved letting go of employees and vendors etc, we have chosen this route", Tata Group chief financial officer Saurabh Agrawal told PTI.
Adding further to this, he said "This is a significant development towards further consolidation in the Indian mobile industry and reinforces our commitment to lead India's digital revolution by offering world-class and affordable telecom services through a robust technology and solid spectrum portfolio".
This merger, which is subject to regulatory approvals, is being done on "debt-free cash-free basis", with all past dues and liabilities to be settled by Tata.
"We believe today's agreement is the best and most optimal solution for the Tata Group and its stakeholders", he said in the statement. Buying spectrum, keeping spectrum, getting the right partner, frequent changes in policies, several courter orders, etc. have impacted the telecom business of Tata Group.
The merger is being done on a debt-free cash-free basis, except for Bharti Airtel assuming a small portion of the unpaid spectrum liability of Tata's towards the Department of Telecommunication, which is to be paid on deferred basis.
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Airtel is set to loose its numero-uno position in the country's telecom space that it has been holding for more than one and half decade with the Vodafone-Idea merger. According the the agreement, Airtel will not take any of the about Rs 40,000 crore debt with Tata Teleservices and neither pay any cash. The deal will also bolster Airtel's spectrum pool with additional 178.5 MHz spectrum in 1800, 2100 and 850 MHz bands, which it will receive from Tata as part of the deal.
Post the completion of this transaction, the employees of Tata will be separated on the basis of two businesses - CMB and EFL (Enterprise and Fixed Line and Broadband) - and will be moved to either of these businesses later on.
Tata and Bharti Airtel will work together to further explore other mutual areas of cooperation, that will be value accretive for both the Groups, the statement said. Once Vodafone merges with Idea, they will be the leader in the telecom business.
The sale of Tata Teleservices is part of Chandrasekaran's larger plan to shed the $103-billion group of stressed assets that are impacting overall profitability.
The decision to exit from the challenging telecom business was not easy for N Chandrasekaran, the newly appointed chairman of Tata Sons. However, it finally found it best to find a nest for the business rather than closing it down as the latter has huge ramifications on business ecosystem. In the past, the group is understood to have held talks with Vodafone for a possible deal. In media interviews last weekend, Chandra said a tough call may have to be taken for the telecom business and that various options were being considered.