The Telegraph
Since 1st March, 1999
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BPL answers Essar buyout call

New Delhi, July 20: And then there were five'.

In one of the biggest-ever telecom deals in the country, Essar Teleholdings of the Ruias snapped up a controlling stake in BPL Communications for Rs 4400 crore (just over $1 billion).

The deal is part of a two-step process that will eventually bring BPL’s telecom operations spanning five states within the Hutchison Essar fold, making it the largest telecom operator with a subscriber base of 11 million spread across 21 circles.

The merger brings down the number of large telecom players in the country to just five: Hutch, Airtel, Reliance Infocomm, Tatas and BSNL.

The writing was always on the wall that Rajeev Chandrashekhar, owner of BPL’s telecom business, would sell out as soon as he had resolved family wrangling over ownership and related issues.

Chandrasekhar, who resolved these issues with father-in-law TPG Nambiar over the weekend, took just three days to wrap up the deal and get out of one of the most lucrative circles in the business.

While announcing the agreement, Chandrasekhar said, “The BPL Mobile franchise has been built over the last 10 years with a lot of passion, commitment and effort and enjoys the unstinting and unparalleled trust of millions of subscribers. The strength of our franchise along with the strong financial performance post in recent months and last one year made us a highly valuable investment proposition for Essar.”

“Keeping the emotional tugs aside, it was important I take the best decision for the franchise along with our customers and employees,” he added.

He said the decision to be acquired by Essar and eventually Hutch Essar was the best deal for BPL customers and team members of BPL.

Ravi Ruia, vice chairman of Essar, said, “This agreement gives us the ability to increase our presence in the country. Our aim is to become the leading telephony services provider in the region. This and the Essar group’s other plans in the telecom sector will give us a pan-India footprint and make us a significant player in this business.”

Essar has a stake of about 26.4 per cent in Hutchison Max Telecom Ltd (HMTL), a joint venture with Hong Kong’s telecom tycoon Li Ka-Shing. The Ruias also held a 9.9 per cent stake in BPL Mobile, which they bought last December from France Telecom.

BPL Communications owns a 74 per cent stake in BPL Mobile Communications (which has operations in Mumbai). Another wholly-owned subsidiary ' BPL Mobile Cellular ' provides cellular services in Maharashtra and Goa, Tamil Nadu and Pondicherry and Kerala.

Nimesh Kampani, chairman of JM Morgan Stanley, said, “The proposed combine of Hutch Essar and BPL Mobile will create a national footprint and will emerge as a strong force alongside Airtel and Reliance.”

There was a mixed reaction to the merger. Bharti officials refused to comment and said chief Sunil Mittal was out of the country.

Justice S.S. Sodhi, former chairman of Trai, was not too pleased with the deal. “It is a sad day for Indian telecom where one of the pioneering builders of private telecom infrastructure has decided to ride into the sunset.”

Virat Bhatia, managing director of AT&T, said, "In face of mounting challenges faced by standalone players, this exit is timely and well-planned.”

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