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Hutchison Essar, a joint venture between Hong Kong's Hutchison Whampoa telecoms group and India's Essar oil services and steel business, has acquired BPL Mobile's wireless businesses in a deal valued at $1bn. This will create India's third largest cellular company and mark the latest round of consolidation in the fast-growing sector.
The merged entity will have a market share to rival India's top two cellular service providers, Bharti Tele-Ventures' AirTel platform, and Reliance Infocomm.
The deal, India's largest domestic acquisition, comes days after Rajeev Chandrasekhar, BPL's chairman, had reached an out-of-court settlement in a family dispute over control of the south Indian group's assets.
The disposal marks BPL's departure from cellular services, where it had been losing market share.
“I'm doing what's best for BPL by integrating it into something that is larger and more stable in a space that will become more competitive,” Mr Chandrasekhar told the FT. He hopes to invest the proceeds from the sale of BPL Mobile and BPL Cellular in his other technology and infrastructure ventures.
Hutchinson Essar will fund the acquisition with $500m in cash and assume $500m of BPL debt.
The deal gives Hutchinson Essar a presence in most of India's 26 telecoms circles and it hopes to acquire additional licences to establish a genuine national footprint. In Mumbai, where both Hutchinson Essar and BPL have a presence, the enlarged entity gains a dominant position that analysts say is short of the regulatory ceiling. Hutchinson Essar now has 10m subscribers, equal with Reliance and close on the heels of market leader AirTel with 12m.
Hutchinson Essar is now likely to accelerate efforts to bundle its various India units into a single entity ahead of a planned initial public offering.
“The sale gives superb national footprint to Hutchinson Essar,” said Vishal Kampani, a director at JM Morgan Stanley, which advised BPL.
Prabhat Awasthi, analyst at Brics, a research company in Mumbai, said the transaction created the last of “five genuine national cellular companies”, raising the stakes for smaller regional cellular companies such as AirCell.