Telenor, Tata Tele merger talks reach final stages

Norway’s Telenor group and Tata group are likely to merge their wireless telephony operations in India with Telenor running the day-to-day operations of the merged entity. As per the valuation of both companies, the Tata group will end up with a minority stake in the merged entity.

According to a person with direct knowledge of the talks, the final contours of the transaction are being sorted out by the top officials of Telenor and Tata Sons in London this week.

The person said both the companies were waiting for the Indian government to come out with its merger and acquisition policy post the current spectrum auction before it can make the announcement.

When contacted, a Tata Sons spokesperson said: “We do not comment on such matters.” A Telenor spokesperson said: “Telenor Group as a principle never comments on rumours and speculations.”

The Tatas have invested a whopping Rs 26,000 crore in Tata Teleservices’ equity and the company has another Rs 24,000 crore as debt. The Tata group has sought permission of the government to buy back NTT Docomo’s 26.5% stake in Tata Teleservices for Rs 7,200 crore at Rs 58 a share.

Tata Sons had engaged Price Waterhouse to value its stake in Tata Teleservices and as per PW’s report, the fair value of Tata Teleservices shares were Rs 23.34 a share. The source said the merger with Telenor will take place at around this valuation. The buyback matter is currently pending with the Finance Ministry.

In India, Telenor has permit for mobile services in seven of the country’s 22 telecom service areas and is operating in six — Andhra Pradesh, Bihar, Gujarat, Maharashtra, Uttar Pradesh (East) and Uttar Pradesh (West). The company posted its first annual operating profit, at Rs 855 crore for calendar year 2014. Revenue rose 36% to Rs 4,070 crore in 2014 from Rs 3,001 crore in 2013.

But in the quarter ending December 2014, the company’s operating loss more than doubled to Rs 276 crore as compared to Rs 132 crore in the same quarter of the previous year.

Revenue rose 38% to Rs 1,151 crore in the quarter, from Rs 836 crore in the corresponding quarter in 2013. It added 2.3 million subscribers in the quarter with a total base of 36.6 million at year-end.

Tata Teleservices, on the other hand, along with its listed associate Tata Teleservices (Maharashtra) provides CDMA technology services in 19 telecom services, GSM services in 18 telecom circles and has launched 3G services in 9 circles. As on September 30, 2014, TTSL had a total subscriber base of 55.42 million subscribers even as it is exiting the CDMA business slowly.

The company incurred a net loss of Rs 6,166 crore on a total operating income of Rs 10,484 crore in FY14 as compared to a net loss of Rs 1,858 crore on a total operating income of Rs10,799 crore in FY13.

During the first half of fiscal 15, the company reported net loss of Rs 1,956 crore on total operating income of Rs 5,418 crore as against net loss of Rs 2,328 crore on total operating income of Rs 5,269 crore during the same period of FY14.