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Batata-BPL merge to create a $2-bn giant

In the largest-ever agreement in India's cellular sector, Birla-Tata-AT&T (Batata) and BPL Communications on Thursday announced their merger to create a new company with an enterprise value of over $2 billion.

The relative equity stake of the venture, which covers western, central and southern India, stood at 50.68 per cent for Batata and 49.32 per cent for BPL.

However, BPL franchise of Maharashtra is out of the JV due to rules laid down by the Telecom Regulatory Authority of India, as no company can have dual presence in one circle.

Addressing a joint press meet in Bombay, Tata Industries chairman Ratan Tata, A V Birla Group chairman, Kumarmangalam Birla and BPL Communications chairman, Rajeev Chandrasekhar said that the new company, for which a memorandum of understanding was signed late Wednesday night, would bid for the fourth cellular zone in the country.

Asked about their absence in northern and eastern India, Chandrasekhar said: "The real value of cellular customers is in the west and south India and some pockets of north. These regions cover majority of cell phone users and we would venture in the rest of the areas at an opportune time."

Ratan Tata, who had initiated the first move towards the merger, said the management structure of the company would remain the same for the time being and the synergies of operations would emerge at a later stage.

The companies would continue as individual operators in their respective circles, Tata added.

The corporate heads also clarified that this JV was limited only to their cellular operations and that all the four operators would compete with each other in basic telephony sector.

Tata said the new entity would be effective within three to six months time after the required board and statutory approvals.

Asked whether the combine would infuse further funds in the JV, both Tata and Birla said they were open to different options for raising capital.

"We will also look at an initial public offering at an appropriate time," Birla said.

It would have a subscriber base close to one million, constituting over 24 per cent of all the cellular users in the country covering Madhya Pradesh, Chhattisgarh, Gujarat, Bombay, Maharashtra, Goa, Andhra Pradesh, Tamil Nadu and Kerala.

Describing the JV as the largest-ever merger and acquisition deal in India, BPL's financial advisors JM Morgan Stanley Chairman Nimesh Kampani said the footprint of this JV would cover over 38 per cent of the country's population and 51 per cent of all fixed line telephone users.

Commenting on the merger, Birla said the Birla Group was delighted that its original investment had evolved into the largest cellular force of the country.

"This merger accords the benefits of scale to take consumer service to a new high. It would develop into one of the premier institutions of the 21st century," he said.

Chandrasekhar said BPL's partner France Telecom had been 'supportive' of the merger.

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