With NTT DoCoMo picking up a 26 per cent stake in CDMA operator TataTeleservices (TTSL) for Rs 13,070 crore, the telco has been valued at three times the current valuation of Idea Cellular. Idea’s current market capitalisation is close to Rs 15,000 crore while the NTT DoCoMo deal values TTSL at just over Rs 50,000 crore.
It is also paying for the GSM spectrum that TTSL has got for nine circles — the GSM network will be rolled out early next year. Since TTSL already runs a CDMA network, the capital expenditure for the GSM rollout will be far lower than that for newer players such as Unitech or Swan — analysts say it could be about 40 per cent lower. But it’s still an expensive entry into the Indian market, however large and lucrative it may be.
After all, Idea has a slightly larger subscriber base — 30.4 million subscribers — whereas TTSL has 29.3 million, together with its subsidiary Tata Tele Maharashtra (TTML). Idea is profitable --revenues were Rs 6,720 crore in the year to March 2008 and the net profit was Rs 1,042 crore.
TTSL’s revenues for the year to March 2008 were Rs 5,378 crore — and the firm is believed to have fairly large accumulated losses. Anyway the deal is good news for the promoters of TTSL because a good part of the money will flow into the company with new shares being issued. That will help pay for 3G spectrum and expansion plans
The open offer to TTML’s shareholders is also good news. If the offer is made at Rs 24-25, the average of the last six months, shareholders should turn in their shares, especially in a weak market. TTML posted a loss of Rs 125 crore in the year to March 2008.
There’s little chance of TTSL and TTML adding too much market share and getting back into the black in the forseeable future even with the infusion of capital.