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Tata to cough up Rs 9000 crores in dues before tele-deal with Airtel is approved

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Before exiting the tele-communications sector, the government demands all Tata’s dues be settled first.

Tata Group may have to pay around Rs 9000 crores  ($1.3 billion) in dues to the Indian government to rescue the proposed sale of its mobile-phone business to Bharti Airtel Ltd., people familiar with the matter said.

The department of telecommunications is demanding that Tata Teleservices Ltd. clear any obligations to the government before it approves the deal that was struck in October, the people said, asking not to be identified as the information isn’t public. Bharti Airtel, helmed by billionaire Sunil Mittal, is unlikely to agree to pay the sum, two of the people said.

Selling its indebted loss-making carrier will ease Tata’s exit from a sector that’s been ravaged by a scathing tariff war, escalated by the entry of Reliance Jio Infocomm Ltd. in 2016. The competitive field has since shrunk from a dozen operators to one dominated by three large players, as smaller rivals quit, merged or went bankrupt.

Emails sent to Bharti Airtel and telecom ministry seeking comments went unanswered. Tata Group declined to comment.

The situation is fluid, and the amount of the dues could change, according to the people with knowledge of the matter. Tata Group has been urging the telecom ministry to reduce the amount it’s asking for, one of the people said. The $10,000 crore coffee-to-cars conglomerate is also preparing contingency plans to wind down the business in the worst-case scenario, another person said.

Declining Profit

Bharti Airtel, which has posted nine straight quarters of declining profit, agreed to acquire Tata Teleservices’s airwaves and users in a “ debt-free cash-free” transaction, with an understanding that past liabilities will be settled by the Tata group.

Tata Teleservices’s subscriber base has since declined from 402 lakh users to 276 lakh users as of May, accounting for 2.44 per cent of the market, data compiled by Bloomberg show.

The department of telecommunications has raised similar demands for nearly all the deals underway in India’s wireless sector. The ministry sought Rs 7250 crore of dues before signing off on the merger of Vodafone Group Plc’s local unit with Idea Cellular Ltd., which will create India’s No. 1 wireless carrier by users, overtaking Bharti Airtel. The carriers paid the sum under protest last month.

Bank Guarantees

Reliance Communications Ltd. — in the midst of closing the sale of its airwaves, towers and fiber to Reliance Jio — was asked to furnish Rs 7740 crore in bank guarantees for upcoming dues or see its licenses cancelled.

For Tata, this will be the second big payout on a mobile-phone business that’s long been in decline. The group agreed to settle a dispute over a $120 crore arbitration award in favor of NTT Docomo Inc. in early 2017 after their Indian mobile-phone partnership soured. – Bloomberg

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