Bharti Airtel, Tata Tele gain 7-10% on deal between cos; brokerages give thumbs up

Multiple brokerage cheer the deal and believe that the deal will provide value to the stock as well as bolster market share.

Bharti Airtel gained over 7 percent intraday as investors cheered the deal between the firm and Tata Teleservices. Meanwhile, Tata Teleservices was locked in upper circuit at 10%.

The telecom major on Thursday announced it will merge its mobile business operations with that of Tata Teleservices.

As per a release on the exchanges, Bharti Airtel will absorb Tata's consumer mobile business in 19 circles (17 under TTSL and two under Tata Teleservices Maharashtra Limited) and the merger is being done on debt-free, cash-free basis.

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Of it's total Rs 10,000-crore liability towards spectrum payment to the DoT, 80 percent will be paid by Tata Tele, according to CNBC-TV18. Airtel will, therefore, assume a small portion, estimated around Rs 1,500-2,000 crore, of the unpaid spectrum liability of Tata Teleservices. Industry experts say the sum is limited considering Tata Tele had not aggressively participated in the last spectrum auction.

The deal will bolster Airtel’s spectrum pool with additional spectrum in the 1,800, 2,100 and 850 MHz bands, all widely used for 4G.

“The acquisition of additional spectrum made an attractive business proposition. It will further strengthen our already solid portfolio and create substantial long term value for our shareholders given the significant synergies,” Sunil Bharti Mittal, Chairman of Bharti Airtel said.

The transaction will also provide Bharti Airtel the right to use Tata’s existing fibre network.

Multiple brokerage cheer the deal and believe that the deal will provide value to the stock as well as bolster market share.

Brokerage: HSBC | Rating: Upgrade to buy | Target: Raised to Rs 490

The brokerage said that Tata Tele could add 5 percent revenue market share in a no cash/debt deal.

Brokerage: CLSA | Rating:Underperform | Target: Rs 430

CLSA said that Tata deal adds value to the stock and it would add spectrum, market share and value. Moreover, the spectrum share would be boosted by 200 basis points to 26 percent post Tata Tele deal. It estimates Rs 7,400-11,700 crore value addition from Tata Tele deal.

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