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Friday, Aug 16, 2002

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Idea, BPL revive merger talks

Boby Kurian


LAST-DITCH efforts are on to salvage the proposed merger involving BPL and Idea Cellular, seen as the country's biggest telecom alliance.

Both players are in crucial talks which could lead to a new deal in the next couple of weeks. Sources close to the negotiations indicated the possibility of fresh meetings between Mr Ratan Tata, Mr Kumar Mangalam Birla and Mr Rajeev Chandrasekhar to put the jinxed deal back on road.

When contacted, Mr Kishore Chaukar, Managing Director, Tata Industries, told Business Line that Idea Cellular (Tata-Birla-AT&T) was in talks with BPL and continued to be interested in the merger. However, Mr Chaukar said he was not aware of any meeting scheduled between Mr Tata, Mr Birla and Mr Chandrasekhar. While admitting that "anxieties" persisted, Mr Chaukar said none of these were "deal-breaking anxieties".

Replying to a specific query whether the talks were on course, he added that no timeframe could be set for the completion of the merger. Mr Chandrasekhar declined to comment on the status of the merger talks. It must be mentioned that industry speculation and media reports in recent weeks had suggested an end to the merger talks.

A BPL spokesperson said the company was "optimistic" that the deal would go through. According to industry analysts, major stumbling blocks on the path of renewed merger talks included equity structuring, BPL's stance on hiving off the lucrative Maharashtra circle and differences over the use of a single brand.

But sources said the bigger difficulty was in ensuring management/operational synergies post-merger.

It is speculated that individual dissonance at the higher management levels of both Idea and BPL was the main reason for the deal drifting away.

BPL sources said a new deal was likely to be different from the now defunct MoU which was signed last year.

"Mr Chandrasekhar will consider any proposal which is reasonable. He sees himself as a long-distance runner in telecom in partnership with others," sources added.

It is learnt that BPL's valuation for hiving off Maharashtra circle has moved up in excess of $200 million. Industry experts doubt whether BPL would be able to carry off a hefty valuation considering that the recent Tata TeleServices-Hughes deal happened at 40 per cent discount.

Incidentally, BPL's efforts to convince DoT that hiving off was not a necessary option had not gained much ground, analysts said.

Meanwhile, both BPL and Idea are exploring alternative alliances. BPL was reportedly in talks with Spice and Escotel to develop a contiguous cellular corridor extending from Himachal Pradesh to Tamil Nadu. If the latest round of talks fails, BPL is planning to position itself as a platform for smaller players to rally around.

"We are not interested in big brands alone. Most cellular players in the country are desperate, although in relative sense," BPL sources said.

Analysts said BPL-Spice Escotel combine may not have a smooth take-off and would find it difficult to fight Bharti's Airtel and Idea Cellular.

Interestingly, last year, Idea (formerly Batata) had made an independent offer to buy out Spice's Karnataka circle.

Analysts expect similar moves if Idea's ongoing talks with BPL hit the wall again.

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