Financial Daily from THE HINDU group of publications
Wednesday, Jul 20, 2005
Info-Tech - Mergers & Acquisitions
Hutch all set to acquire BPL Mobile
Chennai , July 19
HUTCHISON is said to be in talks to acquire BPL Mobile. A decision on the deal is expected in a day or two, according to sources close to the negotiations.
It is stated that the board of directors of BPL Mobile, which has operations in four circles, is scheduled to meet on Wednesday to discuss a proposal to sell the cellular business to Hutchison.
For Hutchison, acquiring BPL Mobile will give it over 26 lakh new subscribers, including 12.4 lakh subscribers in Mumbai. More importantly, it will give Hutch access to Maharashtra, Tamil Nadu and Kerala circles where it does not provide services now. Acquiring BPL Mobile will give Hutch access to operations in the 900 MHz frequency in the four circles.
Hutch has a subscriber base of 84.4 lakh spread across 13 circles. There has been speculation in the telecom market that BPL Mobile was in talks with a number of telecom players for an equity stake, including some foreign partners.
BPL Mobile's Chairman and Managing Director, Mr Rajeev Chandrasekhar, had stated in a function in May last that the company was looking for a business partner who would stay and make necessary investments in future.
Telecom industry experts do not think that Hutch's proposed acquisition will face any regulatory hurdles, on the ground that both operate in the Mumbai circle. The regulatory conditions stipulate that a merged entity should not have a share of more than 67 per cent of that particular cellular market, both GSM (Global System for Mobile Communication) and CDMA (Code Division Multiple Access) services.
If the acquisition goes through, the combined subscriber base will be 27.84 lakh against the total GSM base of 41.76 lakh in Mumbai, working out to a 66.6 per cent share of the GSM market alone. Therefore, the regulatory ceiling is not likely to be breached. The spectrum for the merged entity will be only as per the subscriber base it has, according to the experts.
This is the second major acquisition that Hutch is attempting.
Last year, it tried to acquire Aircel's cellular operations in Chennai and Tamil Nadu circles for about Rs 1,600 crore, including Rs 400 crore of debt. However, the deal did not go through and both the companies mutually called off the agreement that they had signed.
Going by the valuation of Reliance Infocomm, which was recently valued at Rs 25,000 crore for 1.16 crore subscribers, it is expected that BPL Mobile, with 26.2 lakh subscribers, will be worth about Rs 5,500 crore.
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