Search the Internet          Tips  Sites: Finance, Investment

BPL, Birla-AT&T-Tata inch closer to merger

Indian mobile phone giants BPL Communications and Birla-AT&T-Tata are close to finalising an alliance, which could lead them to merge in the next few months, a source close to the talks said on Tuesday.

The source said the two sides could announce plans this week for the alliance under which they would jointly bid for new cellular licences being auctioned by the government over the next two months.

"With it (the alliance announcement), there could be an announcement of a possible merger in the future. The merger can take place once the licences are awarded," the source, who declined to be identified, said.

A merger between the two unlisted companies would create India's largest mobile phone company with a million-plus customers and a dominant presence in the lucrative mobile markets of western and southern India.

"The alliance may happen in the next couple of days. They would be keen to do it before June 29 (the last day of submitting bids for new cellular licences to the government)," the source added.

Birla-AT&T-Tata's chief executive officer Sanjeev Aga declined to comment but an official at the Indian unit of US telecoms giant AT&T said merger talks were underway with BPL.

When contacted by Reuters, BPL Communications' chairman Rajeev Chandrashekar said he expected a wave of consolidation in the mobile business but declined to comment further.

India, which opened up the cellular business to private players in 1994, is now auctioning licences for the fourth cellular operator in its four cities and 17 telecoms circles.

Each of these cities and circles have two private operators now and the slot for the third operator is reserved for a state-run operator.

An alliance between BPL and Birla-AT&T-Tata would help them pool resources and energies to focus on areas crucial to completing a national network, the source said.

Birla-AT&T-Tata is an equal joint venture between AT&T and two of India's largest conglomerates, the Birla and Tata groups.

"They can bid in tandem. They need not bid in areas where one or the other has operations and can put in a joint bid for other areas," he said.

BID JOINTLY

Analysts said the two companies were expected to bid jointly for licences to operate services in Madras, Karnataka and possibly New Delhi as part their effort to have a network in the most promising cellular markets.

The licences, expected to be awarded by August, have been keenly awaited by several leading telecom groups looking to expand their cellular footprint across the country.

BPL, through separate operating companies, runs the mobile networks in Bombay and the states of Maharashtra, Tamil Nadu and Kerala. Birla-AT&T-Tata has cellular services in Maharashtra, Gujarat, Madhya Pradesh and Andhra Pradesh.

The source told Reuters that Birla-AT&T-Tata had emerged as BPL's top pick as a merger partner as BPL stood to hold the maximum stake in any joint entity because it would bring a major market like Bombay and a higher subscriber base to the table.

Other companies with which BPL had discussed a possible merger include New Delhi-based Bharti Enterprises and the Indian unit of Hong Kong's Hutchison Whampoa, industry officials said.

A merger with Bharti or Hutchison would have resulted in BPL holding a lower stake because they also licences for big cities, he said.

In addition, BPL and Birla-AT&T-Tata also have a common shareholder in AT&T.

AT&T holds a 33.33 per cent stake in Birla-AT&T-Tata, and MediaOne, a US company it acquired in 2000, holds a 49 per cent stake in BPL Cellular, one of BPL's two operating companies. France Telecom owns a 26 per cent stake in BPL Mobile Communications, the other operating company of BPL.

Tell us what you think of this report