BackBPL Mobile plan to go national may hit Essar-Vodafone ties
BPL Mobile plan to go national may hit Essar-Vodafone ties
Premium
Mumbai-based wireless phone services firm BPL Mobile Communications Ltd plans to spend $2 billion (Rs7,880 crore) on expanding its network to cover all of India’s 22 telecom licensed areas. Loop Telecom Pvt. Ltd, a majority-owned unit ofBPL Mobile, was offered a phone licence by the government’s department of telecommunication (DoT) on 10 January, but is yet to receive spectrum rights.
The move by BPL Mobile, 9.9% of which is owned by the Essar group of companies, could hurt the relationship between the Mumbai business house and its partner Vodafone Group Plc. in their 33:67 joint venture Vodafone Essar Ltd , India’s third largest wireless phone services firm by customers.
Asim Ghosh, managing director of Vodafone Essar, declined comment on BPL Mobile’s plans. An Essar group official, preferring to remain anonymous, said: “We are investors in both the companies; it would not impact our relationship with Vodafone."
Details of 90.1% ownership of BPL Mobile could not be ascertained immediately. Arif Ali, a spokesperson for the firm, said it is owned by “a clutch of investors," declining further detail. Vodafone Essar and the Essar group are currently involved in arbitration proceedings over the ownership of BPL Mobile.
In July 2005, Hutchison Essar bought out the promoters of four BPL cellular networks in Mumbai, Maharashtra, Tamil Nadu and Kerala, and transferred majority ownership rights in BPL Mobile to Essar pending regulatory approval for the amalgamation. (The networks in the three other states were merged into Hutchison Essar in September that year.)
But with delays in regulatory permissions for the merger of the Mumbai licensed area and a termination of the ownership rights agreement by Essar, Hutchison Essar went to court and got an injunction restraining Essar from selling, transferring or mortgaging shares in BPL Mobile. The Bombay high court finally referred the dispute to arbitration in August 2006, in which no decision has been taken so far.
Essar’s 9.9% holding in BPL Mobile is in keeping with Indian laws, which mandate that no company can own more than 10% in telecom firms operating in the same licensed area or circle.
In an interview, BPL Mobile’s chief executive officer S. Subramaniam said his company does not expect the arbitration to be a road block to its expansion plans. “We have a track record of being a serious player, shareholders can exit, but business is different," he said. “Today we are saying that there is value to be created in BPL Mobile if we expand across the country."
The company’s expansion into 21 circles will depend on its chances being allotted the radio waves required to run mobile phone services. India’s defence forces are expected to vacate around 20MHz of radio spectrum by March, most of which will go to telecom service providers such as Idea Cellular Ltd, Maxis Aircel Ltd, Reliance Communications Ltd, Tata Teleservices Ltd and Vodafone Essar, which are ahead in the queue for spectrum by virtue of applications put in as early December 2006.
“DoT has to tell where each of us stand in the queue for spectrum allocation," said Subramaniam. “I don’t know where I stand in the queue vis-á-vis others."
BPL Mobile, which has paid the licence fees for the national roll-out, has started a detailed study for network expansion in rest of the circles expecting the allocation of spectrum. “As a ballpark estimate, we would require $2 billion; it will also depend on how much of infrastructure sharing we do," said Subramaniam. The firm will partner Essar Telecom Infrastructure Pvt. Ltd, a tower firm that is part of the Essar group, for expanding its network.
Loop Telecom, which also holds a national long-distance phone licence, plans to raise debt and equity in the ratio of 2:1 to fund its expansion plan, BPL Mobile’s CEO said. For equity it could tie up with an international partner or look at the option of raising money from the stock market. “Partnering with an international player remains a possibility, but nothing is finalized at this moment," he said.
BPL Mobile, which has lost customers since its was sold in mid-2005, has invested Rs200 crore in the last one year in the Mumbai network to double the number of towers to 1,100 and increase capacity. It plans to invest Rs100 crore more to improve network quality in the next six months. The company had 1.23 million subscribers in Mumbai at the end of last year.
Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!
