New Delhi: The government, which owns 26% in Tata Communications Ltd, may veto the company’s plan to buy the enterprise business of Tata Teleservices Ltd when it comes up for shareholders’ approval unless all government dues are cleared, a telecom ministry official said.
Tata Teleservices owes the government as much as Rs10,000 crore in spectrum-related charges and licence fee dues, the official said, requesting anonymity. Tata Communications requires the government’s support as a shareholder to proceed with the acquisition in addition to a later-stage approval from the department of telecommunications (DoT).
“The government has a 26% share in Tata Communications. So, in the first stage itself, the government can halt the deal," the official said. Tata Teleservices has requested the government to collect the dues at a later stage, when it approaches the National Company Law Tribunal (NCLT) for approval.
Payment of government dues has become a bone of contention between the government and telecom operators as a wave of consolidation has swept through the industry following the entry of Reliance Jio Infocomm Ltd in September 2016. Smaller operators such as Tata Teleservices, seeing little prospect of survival, have sold their businesses to larger rivals.
In October, Bharti Airtel Ltd agreed to take over Tata Teleservices’ consumer mobile business virtually for free. Airtel is acquiring the assets on a debt-free, cash-free basis, except for it assuming a fraction of the unpaid spectrum fees that the Tata group owes to the government.
At that time, Tata Teleservices had also said it was “in the initial stages of exploring combination of its enterprise business with Tata Communications" subject to regulatory approvals.
In the case of Bharti Airtel’s acquisition of Tata Teleservices, the government’s approval will be required after clearances from the Competition Commission of India and NCLT, the person said.
Emails sent to Tata Teleservices and Tata Communications remained unanswered till press time.
On 8 May, Tata Sons chairman N. Chandrasekaran met telecom secretary Aruna Sundararajan to discuss the closure of Tata Teleservices’ consumer mobile business, as well as Tata Communications’ plan to buy the enterprise business of Tata Teleservices.
On that day, Chandrasekaran had told reporters that the Tata Communications board has to first approve the proposal to acquire Tata Teleservices’ assets. But the Tata group’s primary focus is to close the mobile business, he added.
The telecom department has, however, allowed the proposed merged entity of Vodafone India Ltd and Idea Cellular Ltd to clear dues related to spectrum charges and licence fees, a departure from DoT’s earlier stand that the merger will be approved subject to the payment of dues, Mint reported on 25 May.