Tata group in talks with Vodafone to sell telecom business completely

Business conglomerate Tata group is looking to exit the telecom business completely by selling both Tata Teleservices and Tata Communications in what could be a multi-tiered deal with the country’s second-largest telecom services provider Vodafone, according to a report by business news channel ET Now on Wednesday.

The talks between the two parties, however, are in preliminary stage, the report said, citing sources privy to the development.

Earlier The Economic Times had reported that Tata group is looking to sell Tata Teleservices.

Tatas have presence in telecom through three firms privately held Tata Teleservices (in partnership with NTT Docomo) besides two public listed firms Tata Teleservices (Maharashtra) and Tata Communications (formerly VSNL, in which the government continues to hold 26 per cent stake).

Presently, NTT Docomo owns 26 per cent in Tata Teleservices for which it holds a put option to sell to Tatas. This option is expiring on March 31, 2014. The TV channel said it may extend this deadline to facilitate the deal between Tata and Vodafone. The Japanese firm also owns 11 per cent stake in Tata Teleservices (Maharashtra).

At the same time, Tatas will also first buy out Indian government’s 26 per cent stake in Tata Communications before selling it to Vodafone. The government had been looking to sell stake in various companies as part of divestment programme to gather resources to restrict fiscal deficit.

If it fructifies, this could be part of a larger deal where Tata Communications is also in talks to sell its majority holding in South African communications venture Neotel to Vodacom. Vodacom is majority owned by Vodafone and listed on the Johannesburg Stock Exchange.

Tatas own around 49 per cent in Tata Communications while the government owns 26 per cent. Together this stake is valued at around Rs 5,800 crore.

Tata Sons and Tata Teleservices also own around 56 per cent in Tata Teleservices (Maharashtra) in addition to another group firm Tata Power owning 7 per cent in the firm. Total Tata group holding in this firm is worth Rs 800 crore.

These two transactions itself add up to more than $1 billion. Tata Teleservices separately is a multi-billion dollar firm, by valuation.

If the multi-tiered deal materialises, Vodafone may also pip Airtel to become the top mobile services firm in India.

(Edited by Joby Puthuparampil Johnson)

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