Mumbai: Digital wallet companies, several of which aim to take on the leaders in one of the fastest-growing segments in the ecommerce industry, are aggrieved over new regulations that have increased both the complexity and cost of operations. Many players including Amazon Pay, MobiKwik and PayU say the new KYC (know your customer) norms will increase the cost of doing business.
“It destroys the idea of a wallet as an intermediate option for customers; they might as well open a bank account now,” said Jitendra Gupta, MD of Naspersowned PayU India. On Wednesday, RBI hiked the initial net worth requirement for firms offering prepaid payment instruments to .₹ 5 crore, from .₹ 2 crore now. Also, the net worth must go up to .₹ 15 crore within three financial years from the da- Minimum Net Worth
5 crore 15 crore
COST OF KYC ₹
Major Players Amazon Pay, Itz Cash, Mobikwik, Oxigen, Paytm, PayU, PhonePe
te of receiving authorisation.
RBI also asked the firms to ensure KYC compliance of existing users by year-end. Consumers failing to complete KYC will be allowed to keep only up to .₹ 10,000 in wallets. If these ‘minimum-KYC’ wallets are not converted into ‘full KYC’ accounts within 12 months, no credit facility can be provided.
“It is a little surprising. We had expected RBI, having reduced the limits for minimum-KYC wallets to .₹ 10,000, will allow them to continue,” said Bipin Preet Singh, founder of MobiKwik.
In a joint statement on Thursday, the two sides further said that they “will work together to further explore other mutual areas of cooperation, that will be value accretive for both the groups”, suggesting an alliance around their DTH, enterprise, and overseas cable businesses could be in the offing in future. N Chandrasekaran, chairman, Tata Sons, said, that the deal was the best possible for the Tata Group and its stakeholders. “Finding the right home for our longstanding customers and our employees has been the priority for us,” said. In an interview to ET published earlier this week, the Tata Sons chairman had described the debt-plagued Tata Teleservices as ‘one of the big problems’ he had to deal with. “We will either have to sell it or have a graceful exit,” he had said.
Bharti Airtel chairman Sunil Mittal said the deal would strengthen his company’s market position in several key circles. “On completion, the proposed acquisition will undergo seamless integration, both on the customer as well as the network side,” he said.
Under the contours of the present deal, Tata Teleservices’ wireless operations — consumer mobile business — with over 40 million mobile subscribers, majority of 5,000 employees, and around 178.5 MHz of airwaves — nearly 40% of which are 4G ready — spread across 19 circles will be transferred to Bharti Airtel on a cash-free, debt-free basis, the two companies said in the statement. Tata Teleservices also runs enterprise and fixedline & broadband businesses.
“The merger is being done on a debtfree cash-free basis, except for Bharti Airtel assuming a small portion of the unpaid spectrum liability of Tata towards DoT, which is to be paid on deferred basis,” the two companies said. “All past liabilities and dues to be settled by Tata,” their joint statement said, referring to the roughly Rs 31,000 crore on Tata Teleservices’ books.
A person familiar with the matter said that Bharti Airtel will take care of ro- ughly Rs 1,500-2,000 crore of the Rs 10,000 crore airwaves auction payments that Tata Teleservices needs to make to the government over the next few years.
The Tata-Bharti discussions have gone through various twists and turns. Talks between Chandrasekaran and Mittal were initiated soon after the former took over as the chairman of Tata Sons about six months ago. As this newspaper reported on July 7, the two sides were in discussions to evaluate a mega alliance involving their telecom, overseas cable and enterprise services, and direct-tohome TV businesses. But the talks fell through as Airtel did not want to get bogged down in a multi-play buyout involving huge debt and multiple stakeholders. This was reported by this newspaper on August 4. The two parties have now agreed to a simpler transaction involving just the mobile business as a first step. An executive directly familiar with the discussions said the talks resumed in earnest on Friday and the deal was stitched over the weekend. Goldman Sachs was the adviser to the transaction.
Tata’s wireless operations will continue as usual until the completion of the deal, which will also see Bharti Airtel getting the right to use part of the existing fibre backbone network of Tata Teleservices. Besides, the Tatas will retain their stake in tower company Viom Networks, and will take care of the liabilities associated with it, the two companies said.
Shares of Tata Teleservices (Maharashtra) – the listed unit of Tele Teleservices which provides services in the Mumbai and Maharashtra circles — surged 9.95% to close at Rs 4.42 on the BSE, while Bharti Airtel’s scrip ended at Rs 400.05, down 0.83% on Thursday. Tata Communications ended the day 2.1% higher at Rs 687.60. The BSE Sensex was up 1.09%. The deal announcement was made after market hours. The Tatas on Thursday also said they were in initial stages of exploring combination of Tata Teleservices’ enterprise business with Tata Communications and its retail fixedline and broadband business with Tata Sky. “Any such transaction will be subject to respective board and other requisite approvals,” the company said.
The employees of Tata Teleservices are being separated on the lines of the two businesses — consumer on one side and enterprise & fixedline and broadband on the other.
For the 53-year-old Chandrasekaran, the deal with Bharti marks the second significant restructuring of the group portfolio since he assumed office earlier this year. Last month, Tata Steel and German steelmaker Thyssenkrupp AG, agreed to merge their European businesses to become the second-largest steelmaker of the continent.
“As soon as I came in, I looked at the portfolio and made a list that included Tata Teleservices, delinking European and the India business of Tata Steel, and commercial vehicles and passenger cars of Tata Motors,” he told ET a few days earlier.
Tata Teleservices has been facing immense financial pressure over the years amid ever-increasing competition. Its call to enter mobility in 2002 through CDMA technology didn’t succeed and by the time it adopted GSM in 2008 – and got NTT Docomo to invest around Rs 14,000 crore for a 26% stake — it had already fallen well behind the likes of Airtel, Vodafone and Idea. A brutal price war after the entry of new operators in 2008-09 meant the company continued to post losses while debt continued to mount, leading to Docomo’s eventual decision to exit in 2014. With the Tatas unable to find a buyer for its mobile business, the entry of Reliance Jio in September 2016 — which led to a dramatic industry disruption as data and voice rates tanked — was the proverbial last nail in the coffin, leaving the group with no option but shut it or sell it at any cost.
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