Tata Tele Jumps on Vodafone Deal Talks Report: Mumbai Mover

Jan 03, 2014 5:38 am ET

(Updates with Tata Teleservices Maharashtra comment in fifth paragraph, debt level in seventh, closes shares.)

Jan. 3 (Bloomberg) -- Tata Teleservices Maharashtra Ltd. jumped the most in 2 1/2 months in Mumbai trading, after a report that Vodafone Plc was in early talks to buy a majority stake in its unlisted parent from the $100 billion Tata group.

Shares of Tata Teleservices Maharashtra climbed as much as 15 percent, the highest since May 21, and finished up 9.2 percent at 8.35 rupees. The Mumbai-based company provides telephone services in the western Indian states of Goa and Maharashtra, while parent Tata Teleservices Ltd. with Japan’s NTT Docomo Inc. is a pan-India mobile-phone operator.

Vodafone is in discussions to buy out the Tata group’s 59.45 percent stake in Tata Teleservices, a deal that would help it overtake Bharti Airtel Ltd. as India’s largest wireless provider by subscribers, The Economic Times reported today, citing a person it didn’t identify. NTT Docomo’s stake of about 25 percent gives it first right to buy Tata’s controlling stake, the newspaper reported.

“It’s a conundrum for Vodafone,” said Harit Shah, an analyst with Nirmal Bang Institutional Equities in Mumbai. “They have a lot of cash after last year’s deal with Verizon, but they have to decide if buying the airwaves and a debt-ridden carrier is worthwhile. I think any price will be too expensive.”

The news report did not “pertain to our company,” Tata Teleservices Maharashtra said in an exchange filing today. The company is “not in possession of any unpublished price sensitive information that is required to be intimated to the exchanges,” it said.

Vodafone India spokesman Suresh Rangarajan declined to comment. Calls to NTT Docomo’s Tokyo public relations’ office today, a Japanese holiday, went unanswered.

Tata Teleservices Maharashtra had total debt at the parent level of 45.2 billion rupees ($727 million) and cash and equivalents of 746.8 million rupees as of Sept. 30, according to data compiled by Bloomberg. All five of the brokerage ratings compiled by Bloomberg on Tata Teleservices Maharashtra are “sell”, with a one-year target price of 6.25 per share.

Tata Teleservices Ltd. owns 36.5 percent of Tata Teleservices Maharashtra, with Tata Sons holding another 19.6 percent, according to data compiled by Bloomberg. NTT Docomo holds an 11.8 percent stake.

--With assistance from Kartikay Mehrotra in New Delhi and Mariko Yasu in Tokyo. Editors: Suresh Seshadri, Dick Schumacher