As Tata Sons is grappling with what to do with loss-making Tata Communications (TCL), one of the options being considered is to combine some businesses of the digital infrastructure company with Tata Consultancy Services and sell off the rest, people familiar with the matter said.
“Some similar services of Tata Communications may be merged with TCS and the rest of the business sold as separate business ventures. But it may not be an easy plan to execute, given the government shareholding in the company,” said one person.
Tata Communications, whose CEO Vinod Kumar resigned abruptly last week, owns and operates a sub-sea fibre network that carries about 30% of the world’s Internet routes. Its services including cloud platforms, real-time connectivity and hosted data centres are currently offered together with software company TCS, the people said.
The government, which holds a 26% stake in Tata Communications, appears to be on the same page as the salt-to-steel conglomerate. A senior official at the department of telecommunications said the Tatas must exit Tata Communications, especially after the consumer mobility business of Tata Teleservices (TTSL) was sold to Bharti Airtel.
“Telecom is all about footprint. The Tatas need to exit the business altogether now that TTSL is gone. The government should be given its valuation of 26% stake,” the official said. He added that the government has set a target of ₹1.05 lakh crore from asset sales in FY20.
The Tata Communications stock fell 2% to ₹445.15 at the close on the BSE on Tuesday, giving it a market capitalisation of nearly ₹12,687 crore. Tata Sons, India’s oldest business house, and Tata Communications declined to comment on the matter.
Tata Sons officials said that the group’s top brass, including chairman N Chandrasekaran, had set deadlines to turn around Tata Communications, failing which a decision would be taken on its viability. This is in line with the group’s decision to restructure the $104 billion conglomerate into 10 verticals such as consumer, trading and investments, to help its 100 companies synergise operations and cut costs. “The business has been performing poorly and there were questions raised on the leadership as well,” said one official.
Source: Economic Times