Once again rumors surrounding Tata looking for a potential buyer for its telecom business have surfaced. And this time, Tata’s spokesperson have reportedly confirmed it to the Times of India that they are indeed planning to exit the telecom business. The company is in talks with Vodafone to sell its telecom business including Tata Communications and Tata Teleservice, the report claims. Also Read - Jio maintains lead in 4G download speed, Vi in upload in May: TRAI
“Tata Sons is looking at exiting telecom business completely, talks are at a preliminary stage,” a Tata Group spokesperson told the publication. Vodafone however chose not to comment on the rumor.
The Tata’s are looking at exiting both Tata Teleservices, which holds almost 60 percent stake in Tata Docomo along with Japan’s NTT Docomo, which holds 26 percent stake in the company, and Tata Communications, which owns VSNL, has the Indian government as a stakeholder. It is understood that Tata would have to buy the Indian government’s stake before transferring the company to Vodafone. NTT Docomo has a put option in the joint venture, which expires in March this year. However, NTT Docomo may extend it for another year to help the deal go through. The move is in with line with Tata Group Chairman Cyrus Mistry’s strategy to exit the telecom business completely.
What’s in it for Vodafone?
The deal will make more sense for Vodafone as it would topple Airtel to become the largest carrier in India. According to TRAI’s number for November 2013 , Vodafone had 17.94 percent of the market share, while Airtel topped with 22.31 percent market share. Tata on the other hand had 7.19 percent of the market share. If the deal goes through, Vodafone will have over a quarter of the entire market.
Vodafone certainly has the appetite for the acquisition considering it just sold off its 45 percent stake in Verizon Wireless for $130 billion. Vodafone was also the first carrier off the block to start the paperwork to acquire a 100 percent stake in its India operations after the government allowed 100 percent FDI in telecom from 74 percent earlier.
Vodafone will also benefit from Tata Docomo’s 3G spectrum. Currently both the carriers have 3G spectrum in nine circles but only three of those circles overlap. With this acquisition, Vodafone would be able to extend its 3G operations to six more circles – – bringing the number of 3G circles to 15.