Tata Teleservices in talks with Indian lenders to repay debt early

Plans to pare cost and shut down its loss-making wireless telephony business

Tata Teleservices is in talks with Indian lenders to repay its debt before its maturity so that it can cut its finance cost and shut down its loss-making wireless telephony business.

The board of the company is meeting on December 20 to take a call on repaying its non-convertible bonds worth at least Rs 625 crore before their maturity date, according to a banker.

According to a source, Tata Teleservices will receive a capital infusion worth Rs 30,000 crore from its holding company, Tata Sons. It would use the money to repay lenders and NCD (non-convertible debenture) holders. The first tranche of NCDs would be paid as early as this month. A banker said these NCDs had a coupon rate of 11.5 per cent and the company wanted to clear its NCD liabilities first. Part of Tata Sons’ funds will be lent by Tata Teleservices to its listed subsidiary, Tata Teleservices Maharashtra, to help it to repay its debt.

The Tata Teleservices offer comes at a time when the lenders are grappling with high non-performing assets and sending defaulters to the National Company Law Tribunal for resolution. A banker said they would agree to the prepayment of loans.

In October, Tata Teleservices had announced transferring its wireless telephony business to Bharti Airtel on a debt-free and cash-free basis as part of the Tata group’s plans to exit the wireless business. The company has debts of Rs 30,000 crore and an additional spectrum liability of Rs 9,000 crore. The Bharti group had promised to take over part of the spectrum liabilities. The company also holds around a 32 per cent stake in telecom towers firm Viom Networks and might sell it to American Tower Corporation, which has a majority stake in the tower company. The proceeds of the Viom sale will be used to repay banks.

Since October, the group is working on plans to reduce its debt and lenders say it has promised to return its loans without banks taking any haircut.

According to the plan, its enterprise business was to be merged with Tata Communications and its broadband business with Tata Sky.

The Indian wireless telephony market is going through turbulence after Reliance Jio made an entry in September last year with its free voice data offers. 

This resulted in many marginal players such as Tata Teleservices and Reliance Communications shutting down their second generation-based voice services. Since then, Jio has garnered 145 million customers, compared to 195 million customers reported by Idea Cellular, India’s number three player.