Tata Sons on Thursday issued a statement announcing the exit of Mukund Rajan, chief ethics officer of the group, citing “personal reasons”, and ending days of speculations.
“He will be evaluating entrepreneurial pursuits in the coming months,” the statement said. A spokesperson said Rajan’s last day at Tata Sons, where he has worked since the 1990s, will be March 31.
This, however, added a new twist to the battle for acquisition of the fibre assets of Tata Teleservices (TTSL). On December 7 last year, a consortium led by Rajan had made an offer of $1.2 billion for the business. If the deal went through Rajan would be the firm’s non-executive chairman.
The only contender for the acquisition was Tata Communications (TCL). Rajan’s consortium has not got any response from Tata Sons, said sources. Now, questions are being raised as to whether the deal would still be on the table or not.
Neither the Tata group nor Rajan commented on it, but sources said the offer could not be valid indefinitely. Sources in the know also said a decision on the fibre assets would take between four and six months. There were concerns about the new leadership. US investment company TPG would be only a financial investor if the Rajan-led consortium acquires it.
TCL had experience in running such a business and is best poised to take over the assets. TTSL is non-listed and does not need to go through a bidding process.
There have been previous attempts to shut down TTSL’s operations as well.
Officials from the department of telecommunications (DoT) said when the Tata group wanted to shut down TTSL they had said they wanted to merge it with TCL, the erstwhile VSNL. DoT owns a 26 per cent stake in TCL. The relationship between TTSL and TCL was one of cooperation. While TCL provided data and voice to 3,000 corporate clients, TTSL provided back-end services.
TTSL has a long-distance fibre network of 100,000 km and 25,000 km additional fibre in 40 cities. TCL, too, has a substantial long-distance fibre network. Thus, the acquisition would make sense of TCL.
Sources said the consortium has said it would ensure the employees would be retained. It would also honour the demarcation of business.
TCL would have to find ways to finance it. One way to do so would be take on more debt. It already has about Rs 92,136 million on its books, and it could go up substantially if it wanted to finance its offer through lending.
A fresh equity infusion by the Tata group could dilute the government state. Apart from the acquisition cost, it will need another Rs 3,000 crore to augment infrastructure.
The group took a major hit while selling TTSL’s mobile service business to Airtel, virtually free. They have already paid back loan of Rs 180 billion.