India Inc’s biggest loss now belongs to a telco

As the price competition in India’s telecom space heats up, a number of smaller players are falling by the wayside. Tata Teleservices, which comprises the DoCoMo network and T24 mobile service, posted a net loss of ₹275 billion ($4 billion) for the financial year 2017-18 - the largest ever loss in a financial year for an Indian company.

In addition, another company in the telecom space, Reliance Communications (not to be confused with Reliance Jio Infocomm Ltd), posted the second largest annual loss for an Indian company in 2017-18. The company, which is headed by Anil Ambani, reported a loss of ₹239 billion for the year, after ending its wireless operations and offloading its telecom infrastructure to Jio.

The free sale to Airtel

Tata Teleservices’ net revenue almost halved in 2017-18 to ₹70 billion as it sold off its wireless business. While the company’s operating loss was a relatively paltry ₹6.6 billion, its huge overall loss is mostly due to the fact that it sold its wireless services business to market leader Airtel in October 2017 for absolutely nothing, taking a write-off on the entire unit in the process.

The debt-ridden wireless business had been making losses for years on end, which is why Tata was looking to exit the unit completely. The unit was originally a joint venture with NTT Docomo, a Japanese mobile operator, which sold off its 26% stake at a considerable loss in 2014. With the pending sale to Airtel, Tata will be able to offload some of its current spectrum payment obligations.

The rest of the business?

The future of the remaining parts of Tata Teleservices is not completely certain. In March 2018, the former managing director of Teleservices,Mukund Govind Rajan, mounted a $1 billion bid along with TPG, a private equity firm, for the the parts of the business that were unsold - the enterprise communications and fibre segments.

However, Tata Teleservices’ parent, Tata Sons, rejected the bid, saying it would merge the business with Tata Communications, its internet provider subsidiary, instead. This is contingent on the approval of the government, which has a 26% stake in Tata Communications. It will probably not be too keen on forking out a proportional amount (around $260 million) to buy the remaining parts of Teleservices. It is still said to be assessing the merger.