Tata Tele in big trouble: May sack 1,000 employees to prevent DoCoMo's exit

Tata Teleservices is going through a churn. The company, which offers mobile telephony under ‘DoCoMo’ brand name, is not only in financial difficulties, it is also faced with a hostile joint venture partner NTT DoCoMo which wants to leave.

Now, Tata Tele has begun facing enough trouble on the employee front too. Telecom industry sources tell us Tata Tele has already let go of about 200 people in the last few months and 800 more employees will be asked to leave to reduce the total headcount by 1,000 this fiscal. They say manpower is being rationalised so that the loss making telco can become EBIDTA positive this fiscal and prevent DoCoMo’s exit.

Already, there are conflicting reports about a company veteran, Deepak Gulati, being also asked to leave. Though Gulati, Executive President with the company, termed these reports as “utter falsehood” in a telephone interaction with Firstpost, multiple industry sources confirmed Gulati’s imminent exit.

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A story in the Hindu Business Line had announced Gulati’s resignation in May itself and had noted that he is credited with building the mobility business for the Tatas since he joined Tata Tele in 2008.

A detailed questionnaire sent to Tata Teleservices on these issues went unanswered.

But an industry source close to Gulati said the entire issue of his leaving and his insistence on a hefty severance package was linked to NTT DoCoMo wanting to exit the joint venture. The Japanese company holds 26% stake in Tata Teleservices and is keen on an exit since the JV has not achieved financial targets set out at the time of formation.

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A story in the Economic Times recently noted that NTT DoCoMo had bought 26% stake in Tata Teleservices in November 2008 for around 13,000 crore, valuing the company at over 50,000 crore. The story said that now, Tata Tele is saddled with a debt of nearly 22,000 crore and ballooning interest charges. It quoted people involved saying the Tata Group has withdrawn funding for the telecom venture, resulting in operations being shut in three service areas and partial closure in another five.

The same story said Tata Tele has lost more than 10 million customers since last year. Its customer base stood at 66.9 million as of February 2013 against 80.2 million at the end of June 2012.

Given the precarious financial condition of almost all telecom service providers and rising debt burden of the industry, Tata Tele is not the only company facing such trouble. Also, as part of industry consolidation moves, Tata Tele has frequently been in the news earlier over DoCoMo’s stake being acquired by other telcos. Uninor and Russia’s Sistema have been named at various points as potential suitors but neither company has confirmed talks for a buyout. The ET story quoted earlier spoke of Sistema being in advanced stages of buying a majority stake in Tata Tele - all of NTT DoCoMo’s stake and a part of Tatas’ stake. But Sistema has brushed aside these reports, saying it wouldn’t comment on speculation. “Our immediate focus is to efficiently run 9 circle operations and turn OIBDA positive by end of 2014”.

Whoever be the buyer for Tata Tele, one thing is clear: the company is shedding flab to perhaps get ready for a wedding.

In a late evening response to Firstpost’s queries, a Tata Teleservices spokesperson said “Without getting into the merit of the questions raised, Tata Teleservices finds the queries to be inappropriate and misleading. The company as a policy does not comment on speculations”.