Batata-BPL Communications to float new firm

By Our Special Correspondent

MUMBAI, JUNE 28. Birla-Tata-AT&T (Batata) and BPL Communications have signed an agreement to consolidate their operations, which makes it the largest cellular joint venture company in India, with a subscriber base close to one million, constituting over 24 per cent of all cellular users.

The footprint of this joint venture will cover 38 per cent of the country's population and 51 per cent of all fixed-line telephone users. The new company will provide cellular services in Madhya Pradesh, Chhattisgarh, Gujarat, Mumbai, Maharashtra, Goa, Andhra Pradesh, Tamil Nadu and Kerala. It will jointly pursue the future expansion of its footprint.

It will move to a common brand name and a new corporate identity in a phased manner. For the time being, ``the management structure will remain what it was with local identity within the framework of common strategy until we develop a common brand,'' said Mr. Ratan Tata, Chairman, Tata Sons, while addressing a press conference here today to announce the joint venture. ``We will evolve a neutral brand name,'' said Mr. Kumarmangalam Birla, Chairman, Aditya Birla group. ``Its a pooling of cellular assets,'' said Mr. Rajeev Chandrasekhar, Chairman, BPL Communications.

However, BPL franchise in Maharashtra does not form part of the joint venture. ``BPL will demerge the Maharashtra circle and form a separate entity and BPL may sell that property to a potential buyer,'' said Mr. Nimesh Kampani, Chairman, JM Morgan Stanley, financial advisor to BPL who structured the merger for them. Mr. Kampani said the merger was by far the largest domestic merger and acquisition transaction till date and clearly creates the largest wireless telecom company in India, which will attract significant investor interest, domestic as well as international.

The total enterprise value of the new company is over $2 billion (around Rs. 9,900 crores). The relative equity stake will be 49.32 per cent for BPL consortium and 50.68 per cent for the Birla-Tata-AT&T combine. The total equity value of the new entity is around Rs. 6,500 crores (about Rs. 3,200 crores for BPL and about Rs. 3,300 crores for Birla-Tata-AT&T). The debt component is around Rs. 1,300 crores for BPL and around Rs. 2,000 crores for Birla-Tata-AT&T.

Mr. Birla said, ``This merger accords the benefits of scale to take consumer service to a new high and I am confident that this joint venture will develop into one of the premier institutions of the 21st century.'' Mr. Tata said the new venture would be able to give quality service in a cost effective manner and many of the back operations could be combined to be cost effective.

Mr. Chandrasekhar said, ``We are pleased to partner the Birlas, Tatas and AT&T along with our existing relationship with France Telecom and I am convinced that this partnership and this combine will soon establish itself as a definitive telecom franchise in the country.'' Mr. Jordan Roderick, Head of International Operations for AT&T Wireless Services, said, ``This merger combines the strengths of four organisations and will undeniably provide consumers the best that wireless communications has to offer in India."

The new joint venture has already covered most of the South and West and some areas in the North. If anybody makes a strategic sense to join the new consortium, it would be RPG group from Chennai and Modi group which owns the licence for Karnataka.

As BPL may sell its Maharashtra circle for cellular services to a potential buyer, Hutchison Max, Bharti and Reliance are likely to bid for their licence. Of the four metros Maharashtra is the most attractive circle in the country.

The Government will start the bidding process from June 29 for the second operator in this circle which is expected to end by July. Whoever is not getting into this bidding may be interested in BPL's already existing facilities which will save the potential service provider start-up time.

BPL may sell Maharashtra circle as the Department of Telecom (DoT) stipulates that no single provider can bid for more than one licence in the same circle.

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