Financial Daily from THE HINDU group of publications
Thursday, Jul 21, 2005
Info-Tech - Mergers & Acquisitions
BPL Mobile in Rs 4,400-cr deal with Hutchison Essar The biggest M&A in Indian telecom space
IT'S NO EASY DECISION: Mr Rajeev Chandrasekhar, Chairman & CEO of BPL Mobile, interacting with the press in Bangalore on Wednesday. - Bhagya Prakash K.
Bangalore , July 20
MR Rajeev Chandrasekhar, Chairman & CEO of BPL Mobile, along with his co-investors, have entered into an agreement with Hutchison-Essar to sell their 64 per cent stake in the flagship BPL Communications Ltd in all cash deal with an enterprise valuation of over $1 billion (Rs 4,400 crore).
BPL Mobile will merge with Hutchison Essar's cellular services in the biggest merger and acquisition deal in the Indian telecom space till date. The transaction, valued at approximately $400 per user, is being routed through an associate company of Essar Group, which will transfer the assets to Hutchison Essar subsequently.
Once merged, Hutchison Essar will emerge as a strong competitor to the cellular operations of Reliance and Airtel, and the largest pure play GSM operator in the country with a subscriber base of 11 million across 21 circles. BPL Mobile with a subscriber base of 2.8 million operates across Mumbai, Maharashtra & Goa, Tamil Nadu & Pondicherry and Kerala circles The merged entity will have a market share of 55 per cent in Mumbai, which is arguably the most attractive telecom market in the country, where the operations of BPL and Hutchison Essar overlaps. Further, the deal will extend the acquirer's footprint into new circles such as Kerala and Tamil Nadu.
The combined entity will have annual revenues topping a billion dollars. Following the deal, Mr Chandrasekhar today resigned as the Chairman and CEO of BPL Mobile. It is learnt that Essar will conclude separate deals to buy out outstanding shareholders in BPL Communications, which include foreign and domestic financial institutions and the patriarch of BPL Group, Mr T.P.G. Nambiar.
"We have decided to sell our controlling stake in what is the biggest M&A in the Indian telecom industry. This deal will herald the next phase of consolidation in the telecom business," Mr Chandrasekhar told media here.
"My decision to leave BPL Mobile was and is not an easy decision. But I strongly believe that the decision to be acquired by Essar and eventually Hutchison Essar is the best for our customers and team members of BPL Mobile," he added.
Mr Chandrasekhar refused to divulge how much the sale of 64 per cent would unlock for him and the co-investors. BPL Mobile carries a debt of around Rs 1,900 crore.
Informed sources said Mr Chandrasekhar directly holds close to 40 per cent stake in the flagship company, which would mean that he would have unlocked personal wealth topping Rs 1,000 crore (after adjusting for the debts in the enterprise valuation).
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