Interestingly, Tata Sons is writing off its investments in Tata Tele for the last two financial years and will have to do so again in the current financial year ending March 2020. Tata Sons infused funds worth Rs 23,090 crore in TTSL during FY 2019 and during the fiscal 2020 which resulted in an increase in net debt at July 31 2019 to Rs. 30,488 crore from Rs. 27,870 crore as on March 31, 2019. Due to this fund infusion, Tata Tele managed to reduce its debt to Rs 8,265 crore as on December 31, 2019, from Rs 30,741 crore (including spectrum liabilities) as on March 31, 2018.
As Tata Tele has very low liquid surplus as on December 31, 2019, Tata Sons will have to come forward yet again to make the shortfall. “TCS will have to again come to Tata Sons rescue so that Tata Tele can pay Rs 14,000 crore to the government. This can be by way of TSL selling part of its 72.05 stake in TCS or seek higher dividend. There is no other way out,” said a Tata watcher. Tata Sons stake in TCS is worth Rs 5.9 trillion as on Friday’s closing.
The Tata group started its journey in the wireless telephony business as a three-way venture along with Birla, AT&T. After AT&T and Birla split from Tata, it became a pan-India telecom operator in January 2005. The company had a unified access (basic and cellular) service licence to operate in 19 circles, and a national long-distance licence to provide services within India.
After the competition in the telecom sector increased, Tata Tele failed to take on the competition even as Bharti Airtel, Vodafone and Idea Cellular cornered a large share of the market. The launch of cash rich Reliance Jio
further compounded its problems – finally leading to its exit from the sector in July last year.
As per an agreement with Bharti, all customers, assets, spectrum, and agreed liabilities of Tata Tele was merged with Bharti Airtel
– leaving the debt for Tata Tele. Post exit from its wireless telephony services, Tata Tele continues to provide the residual businesses such as enterprise business, fixed-line, and broadband business.
Insiders said the latest blow to the telecom sector will hit the financials of Tata Sons
The firm may have to either sell TCS shares or seek higher dividend from its best-performing company
Tata Sons has been writing off its investments in Tata Tele for the last two financial years and will have to do so again in the current financial year
Owing to this fund infusion, Tata Tele managed to reduce debt to Rs 8,265 crore as of Dec 31, 2019, from Rs 30,741 crore as of March 31, 2018