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DoT, FIs may oppose Batata-BPL merger

G. Rambabu

NEW DELHI, April 28

THE country's largest telecom merger between Batata and BPL for cellular services valued around $2 billion is heading for trouble, with the Department of Telecommunications and financial institutions likely to oppose the move.

According to highly placed DoT officials, although the merger proposal between both the cellular companies had been announced in June last year, the department had not yet been approached for a `no-objection certificate'.

"As and when our consent is sought, we may be forced to raise objections. The merger between both the groups is likely to result in a monopoly situation, which we would like to avoid. The companies have not yet informed us on their plans for the Maharashtra circle," they said.

They pointed out that Batata currently offered cellular services in Maharashtra, Gujarat, Andhra Pradesh and Madhya Pradesh, while BPL operates in Mumbai, Maharashtra, Tamil Nadu, Kerala.

"The companies are aware that since both of them at present operate in Maharashtra, if they merge all their operations, then it would run counter to the licence agreements. One of them has to necessarily sell off the Maharashtra circle otherwise it would lead to monopoly. Being the licensor, we should be kept informed of the plans on this front. However, to date we have not been approached," they said.

Meanwhile, the financial institutions too have raised objections to the proposed merger. Both IDBI and ICICI, which are the biggest lenders to BPL for its cellular ventures, have expressed their displeasure at not being updated or consulted about the developments on the merger. They have noted that the proposed merger could be detrimental to their interests.

According to informed sources, both the FIs have pointed out that BPL has been "consistently defaulting in payments of interest and consequently the account is likely to become a non-performing asset".

They have pointed out that BPL Cellular has not yet been able to achieve financial closure. What is more, the company's operations have been unsatisfactory since inception resulting in breach of certain financial covenants stipulated for long-term assistance, they have said.

The FIs have also observed that the physical completion of the company's cellular rollout lags behind the approved rollout plan resulting in huge increase in costs.

"The above situation has resulted in the company yielding market share to its competitors in the relative circles. BPL's market share is expected to undergo further erosion with the impending entry of third and fourth operators,'' they have noted.

The sources said that with both the DoT and FIs indicating their opposition to the merger, the plans might have to be put on the backburner for sometime. Both the companies had earlier sought to finalise the terms, and announce a single common brand for all their operations by June this year.

Currently, the combined strength of Batata and BPL amounts to a total subscriber base of 17.07 lakh. BPL has a subscriber base of 8.98 lakh (including its Maharashtra customer base of 1.74 lakh which is proposed to be hived off), while Batata amounts to 8.09 lakh.

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