The Tata group is preparing to shut down a large part of its telecom business and an announcement is likely later this month, according to industry sources. Senior executives at Mumbai-based Tata Teleservices, which operates wireless, wireline and broadband services, have already been told of the possible closure, it is learnt. Even subscribers are being informally told to migrate to other service providers through MNP (mobile number portability).
A closure, the first under Tata Sons Chairman N Chandrasekaran, is being seen as part of a consolidation in the telecom sector. High debt and intense competition have made many businesses unfeasible, triggering a series of mergers and sell-offs. While Tatas were engaged in talks to sell their telecom business to players such as BhartiAirtel and Vodafone, deals failed to fructify, officials at these telcos confirmed.
When asked whether a decision had been taken to close the group’s telecom business, a Tata Sons spokesperson said, “As far as Tata Teleservices is concerned, the group is examining all options at this point in time.’’
The official website of Tata Teleservices Ltd is still showcasing career opportunities at the company, saying “unlock the world of opportunities’’. However, a source in the know told Business Standardthat teams have been put in place to deal with complex issues that are an integral part of any closure. While exploring options for an estimated 5,000-plus employees is a top concern for the Tata group, there are several other issues related to real estate, offices, consumers, foreign partners, technical tie-ups and spectrum sale that need to be sorted as well, he said. The group is believed to be in dialogue with the Department of Telecommunications and the Telecom Regulatory Authority of India (Trai) for some of these issues.
The telecom business is not viable any longer for the Tatas, according to insiders. When it had started more than a decade ago, it was a leader in the CDMA technology, which has lost its edge over a period of time. However, some telecom businesses on the enterprise side, operated under Tata Communications, will not be shut down, sources said.
Tata Teleservices, an unlisted entity, has Tata Teleservices (Maharashtra)—a listed company—as a subsidiary. Tatas’ telecom business has pan-India operations across 19 circles. However, its subscriber base has been falling continuously. As of July 2017, its wireless user base was at 42 million, down from 43.7 million in June, according to the latest figures provided by Trai. That makes Tata Teleservices’ market share just 3.55 per cent in the country. Chandrasekaran or Chandra, as he’s referred to, is of the view that Tatas must be at the top across businesses, and that there’s no point in having a token presence in any segment.
Even as the group is looking at options to place Tata Teleservices’ employees in other businesses once a shutdown happens, there were reports of layoffs at this company a few months ago. The company had not commented at that point but reports indicated that some 500 to 600 employees from sales and marketing team had to leave.
The board of directors at Tata Teleservices is chaired by managing director of the company, SrinathNarasimhan, a veteran in the group. SaurabhAgrawal, group chief financial officer of Tata Sons, is among the seven directors on the Tata Teleservices board. Agrawal, part of Chandra’s A team, is considered the brain behind all key financial decisions of the group.
For the financial year ended March, Tata Tele’s net worth stood at a negative Rs 12,250 crore, and its loss at the net level was Rs 2,844 crore. The company’s turnover declined to Rs 9,682 crore in FY17 from Rs 10,718 crore in FY16. The company’s debt was at Rs 25,600 crore. Analysts pointed out earlier that a fire sale or a shutdown of the telecom business would mean a cost of USD 4 billion to USD 5 billion for the group. This would be in addition to a payout of USD 1.2 billion that Tatas made to its former partner, Japan’s DoCoMo, for its exit from India.
All telecom players, barring BhartiAirtel, are making losses following Reliance Jio’s entry and its competitive pricing in the India market. - Business Standard