TATA & Birla
Ratan Tata had no choice but to blink when the Telecom Ministry launched official investigations into the fracas. In April 2006, the Tata group was compelled to sell its stake in Idea to the Aditya Birla group and exit the company completely. The 49% stake held by the Tatas was purchased by Kumar Mangalam Birla for $960 million.
What if Ratan Tata had cooperated with Kumar Manglam Birla instead of engaging in a proxy battle and allowed Idea to grow as rapidly as the other telecom companies? For one, he would not have lost the goodwill and friendship of an entrepreneur like Kumar Mangalam Birla. More importantly, the stubborn behaviour of the Tata group possibly cost in billions of dollars in potential profits. As the latest bidding war for Hutch indicates, the fourth largest telecom company is being valued at atleast $20 billion. A 49% stake in Hutch is as good as $10 billion in cash. All that Ratan Tata could manage from his 49% stake was a comparatively measly $1 billion.
What if Ratan Tata had cooperated with Kumar Manglam Birla instead of engaging in a proxy battle and allowed Idea to grow as rapidly as the other telecom companies? For one, he would not have lost the goodwill and friendship of an entrepreneur like Kumar Mangalam Birla. More importantly, the stubborn behaviour of the Tata group possibly cost in billions of dollars in potential profits. As the latest bidding war for Hutch indicates, the fourth largest telecom company is being valued at atleast $20 billion. A 49% stake in Hutch is as good as $10 billion in cash. All that Ratan Tata could manage from his 49% stake was a comparatively measly $1 billion.
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Source : IIPM Editorial, 2006
An IIPM and Management Guru Professor Arindam Chaudhuri's Initiative
