Tata Teleservices, which has a debt of Rs 34,600 crore as on March this year, is mulling selling its telecom tower company, Viom Networks, to tide over the crisis.
In the past two financial years, the company has received Rs 4,500 crore of equity funding from parent Tata Sons but is now looking for other options to repay of loans.
A top official of Viom said sale of the company to a foreign investor was almost certain and the deal would be signed in the current quarter. Tata Teleservices, which has 53 per cent stake in Viom, will continue to hold part of its stake, the official said. A banker said Viom Networks was expected to be valued at around Rs 19,000 crore, including a debt of Rs 6,500 crore. At this valuation, Tata Tele's stake in Viom is valued at Rs 6,875 crore.
The banker said Tata Tele was likely to sell half of its stake, while Srei Infrastructure - which owned around 12 per cent stake in Viom - would exit completely. The transaction is important for Tata Teleservices as the Tatas cannot keep pumping money into loss-making operations. Tata Sons has already invested Rs 4,500 crore in Tata Tele to help it repay loans. Besides, for FY15, the company made a net loss of Rs 3,850 crore on net sales of Rs 10,870 crore, as against a net loss of Rs 6,170 crore on net sales of Rs 10,350 crore the previous financial year. Tata Teleservices debt rose, as it invested another Rs 5,864 crore for bidding for third-generation-based spectrum blocks in nine circles. The purchase of additional spectrum would add to its debt and delay its cash break even by another two years, said an analyst. An e-mail sent to Tata Teleservices did not elicit any response.
In this backdrop, bankers and analysts said it was becoming imperative for the company to sell its stake in Viom which has attracted an offer from American Towers. The finance cost is one of the biggest contributors to Tata Teleservices' losses and any plans to cut costs would help the company to get back to profitability faster.
Once the Viom deal is over, Tata Teleservices will be working with Telenor of Norway for a possible merger with the company. With the government clearing the way for spectrum-sharing and trading, Tata Teleservices and Telenor have put their merger talks on the fast track and a decision is expected soon, said a banker.
At the same time, Tata group officials are also negotiating with NTT Docomo to buy out its 26.5 per cent stake in the company. The matter is currently under arbitration in the London Court of Arbitration over valuation differences, as Docomo is seeking higher valuation.
