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Batata-BPL to streamline operations

Baburajan K

The Birla-Tata-AT&T-BPL combine is planning to significantly prune the number of vendors as part of the strategy to better utilise synergies, once the merger comes into effect.

In the period leading up to the finalisation of the merger, the two cellular majors will try to forge alliances with common service providers and partners, primarily to reduce duplication of work and costs.

Post-merger, the company will be able to bring down costs of outsourced services as it will have a larger subscriber-base. "The economies of scale will give the firm capabilities to source equipment at competitive rates," Girish Rangan, executive director and CEO of BPL Mobile said.

Specialised application programmes, software, unified billing systems and call centres could also be either sourced or internally developed at competitive rates. A highly talented resource team can also be developed from the common pool to offer quality value-added services to customers, Rangan added.

The major areas of focus will be in billing and wireless application protocol based services. "Both the companies have different partners in many areas. These issues will have to be addressed-- to reduce the number of vendors and services providers," Sanjeev Aga, president and chief executive officer of Birla-Tata-AT&T said.

However, sources close to the deal refused to speculate either on the estimated cost savings arising out of the merger, or on the additional revenues and subscribers that may come into the merged entity's fold.

On Thursday, Tata group chairman Ratan Tata had told a press conference that "the merger has been worked out with the customer in view." The benefits of considerable economies of scale and common facilities, as also of the contiguous footprint will be passed on to the customer. "Back-office operations can be consolidated into a cost effective proposition," Tata had said.

As the company will be addressing the mass market after the merger, interest costs, operational costs etc can be reduced. "For instance, we expect to get telecom equipment at cheaper rates since we will be ordering larger quantities," Aga added.

Though the issue of redeployment of senior staff will have to be tackled, mainly in the marketing and human resources departments, the company will not go for staff cutbacks. Birla-Tata-AT&T has a total of 1,000 employees, while BPL Communications' staff strength stands at 1,350.

"There could be some redeployment of manpower, but we will not ask people to leave. We are in the process of expanding further in the next few months as part of bidding for the fourth cellular licences, and may require more manpower to serve the new circles," Aga added.

The merged entity will approach financial institutions and banks to rework the existing interest rates on their loans. Partnering with two big corporate houses will give the BPL group additional financial muscle in the marketplace. The group has been in talks with financial institutions for its expansion plans, but this move did not take off due to strategic reasons.

"Fund raising for our future plans will be easy as we will be projecting a huge subscriber-base and revenue streams. If we go for an initial public offering or other fund raising programme in the next 12-18 months, the merger will help us get a better valuation," Aga said.

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