Tata Teleservices (TTSL) is planning to raise more than $1 billion by selling a chunk of its stake to private equity (PE) and strategic investors in one of the largest telecom deals in recent times. India’s second-largest CDMA operator plans to sell 15-30% to financial and strategic investors to raise money for its expansion in both CDMA and the soon-to-be-launched GSM services, people close to the deal said. The Tata Tele deal, which is being run by Lazard, could be bigger than the Bharti Infratel deal. Last December, the Bharti Airtel wireless tower offshoot raised about $1 billion from investors such as Singapore’s state investment firm Temasek.
As Tata Tele wants to rope in a strategic investor and even PE funds, the stake involved could be as high as 25-30%, a person involved in the transaction said. “Tata Teleservices continues to seek appropriate and value enhancing opportunities that meet its overall business objectives but as a policy, Tata Teleservices doesn’t comment on speculation,” a spokesperson said.
Israeli telecom firm Bezeq, which is planning to make a comeback to the world’s fastest-expanding telecom market, is learnt to be among those interested in buying Tata Tele’s stake. Bezeq had entered India in the mid-nineties through a joint venture with HFCL. In 1999, it sold its stake in Fascel (the cellular operator in Gujarat) to Hutchison and left Indian shores.
Temasek and Chennai-based tycoon C Sivasankaran currently hold 9.9% and around 8% respectively in TTSL. Mr Sivasankaran bought his TTSL stake for Rs 1,200 crore from Tata Sons in March ‘06 while Temasek had to pay nearly Rs 1500 crore for its equity. Siva, as he is widely known, is looking to sell his stake, according to sources. He is believed to be seeking Rs 50 per share, a price that has put off most prospective investors.
TTSL, which has a subscriber base of nearly 25 million, offers CDMA-based services in 20 of India’s 23 telecom circles. Early this month, it also got spectrum to roll out operations in the remaining three circles of Assam, North East and Jammu and Kashmir, making it the third pan-India operator after Bharti Airtel and Vodafone Essar. In Maharashtra, including Mumbai and Goa, TTSL’s listed subsidiary TTSL (Maharashtra) provides telecom services.
Besides starting operations in the three new circles, the telco has also applied for GSM spectrum in 20 circles, for which it has already got licences. On Tuesday, it received spectrum in Tamil Nadu and Chennai and plans to roll out services before this year-end. It will, therefore, need more funds to start GSM services as and when spectrum allocation is done. TTSL is also the fastest growing service provider, according to a report by the Telecom Regulatory Authority of India (Trai), with a market share of nearly 10%.
“With the increasing market share and future investment plans for network expansion, TTSL has an opportunity to dilute equity stake at a premium,” said Ovum India head (IT & Telecom) Alok Shende. TTSL is, however, still making losses and needs funds for growth. “Tatas have to dilute stake to pump in more money into their telecom venture,” said another analyst on the condition of anonymity.
Last month, TTSL entered into a brand franchising agreement with Virgin Mobile to offer services of the British company over its infrastructure. “While TTSL has spent a lot in brand building and innovative schemes in the past two-three years, it needs to do more to improve market share,” the analyst added.
Source: Economic Times