Consolidation call

Calcutta, March. 14: Hutchison and Essar are working on the final contours of a merger that will create the country’s largest cellular company after AirTel.

Sources said plans about a combined entity expected to break even with a turnover of over Rs 4,000 crore will be announced soon. “Hutchison and Essar are likely to announce the formation of a consolidated telecom entity soon. The negotiations are in the final stage,” they added.

The new company born out of the merger will be called Hutchison Essar. It will straddle 12 circles, including the recently acquired the Uttar Pradesh West region. The 12 circles will include three currently held by Essar under the Aircell brand, and the Punjab circle, which Hutch will soon buy from Escotel.

The subscriber base of the combined entity with a strong presence in the four metros will be over four million. “Going by the current growth rate, the new company should cross five million mark in its subscriber base over the next 12-16 months,” sources said.

Hutchson will hold 49 per cent in the new company. Essar, Kotak Mahindra, Hindujas, Max India and Hong Kong based Distacomm will be among the other major shareholders controlling 51 per cent. The Hindujas will own a slice of the company through their 30 per cent stake in Fascel, which is also being merged.

Sources pointed out that Essar’s holding would be around 34-36 per cent, depending on the valuation of the company. More important, the buzz that Max India and Distacomm’s stakes will be acquired by the two key shareholders is points towards further stake shuffles.

Both Max India and Distacomm are said to have been planning their way out and the negotiations are already on. These reports, however, could not be confirmed despite several attempts by The Telegraph. Nor is there is an official word on whether the Hindujas will also sell their holding in the new company.

The Hong Kong based Hutchison Whampoa, one of the leading telecom companies of the world, has long term plans for India, which is fast emerging as one of the hottest markets for mobile services.

Sources say the combined entity will also try to enter circles where neither Hutchison nor Essar are present.

Virtual pre-paid

PTI adds: Former Motorola India president Pramod Saxena has tied up with a South African firm for a 50:50 venture that will offer “virtual prepaid time” services to mobile subscribers.

The Rs 10-crore venture, to be called India Prepaid Services, will be the first in India to offer virtual prepaid time. It has already inked deals to introduce virtual airtime recharge for Bharti and Hutchison groups.