What is the cost of Tatas' telecom misadventure?

When the telecom industry goes through an overhaul after the launch of 4G, the big firms are either exiting or consolidating financially. Tatas merges telecom business with Bharti Airtel; Anil Ambani exits from the mass-telecom business 2G; and Bharti ups FY18 investment to Rs 25,000 crore to expand 4G network. Earlier Idea and Vodafone agreed for a merger to create the largest telecom company in India.

Among the lot, Tatas will be the first one who is exiting its major telecom operations, but after accumulating huge financial losses. Recently, the parent company Tata Sons settled its dispute with its joint venture partner--- Japan's largest mobile firm NTT DoCoMo--- and paid $1.2 billion to close the deal. Docomo transferred its shares in Tata Teleservices (TTSL) to Tata Sons and the companies designated by Tata Sons. But Docomo will continue holding 11.76 per cent stake in Tata Teleservices Maharashtra (TTML), a subsidiary of TTSL. The Tata-Airtel telecom deal is on a no-debt, no-cash basis, implying that Airtel is not taking over any of the debt with Tata Teleservices and is neither paying any cash.

How much money Tatas' lost in telecom? TTSL has made an aggregate losses to the tune of Rs 31,000 crore on a standalone basis between FY2008 and FY2016, while TTML amassed losses of around Rs 5,600 crore between 2008 and 2017. TTL had a gross debt of Rs 35,204 crore at the end of the March 2016, while the company, which is into operations in Maharashtra, had a debt of Rs 15,535 crore at the end of last financial year. Thanks to the higher equity infusions from the parent company Tata Sons, the networth of both the companies stood lesser impacted considering the losses and the debt. TTL had a negative networth of Rs 16545.83 crore in FY16 and TTML had a negative Rs 5908.84 crore in FY17.

It was in 1996, Tatas launched TTSL as the pioneer of the CDMA technology platform in India--- much before Ambanis launched their CDMA platform in 2002. It acquired Hughes Tele.com (India) and renamed it as Tata Teleservices (Maharashtra) in 2002. Despite the consistent efforts, Tatas failed to make a mark in telecom. In 2009, they tied up with Docomo and revolutionised mobile voice business by launching 'pay per use' or 'pay for the seconds'. In November 2010, TTSL became the earliest one launching 3G services in India.

Tatas failed miserably in their war with the titans in the industry. The arrival of Jio made them insignificant in the market. Though bled a lot, the exit is sensible and a financial relief.