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CORPORATE: TELECOM Born again? It's been a tough run so long for BPL Innovision. Now, a possible merger with telecom giant Birla-AT&T-Tata combine offers the company a ray of hope. By Suveen K. Sinha
In the end, it was probably because he wasn't paranoid enough. Ironically, it was a job with Intel in the US the then 26-year-old Rajeev Chandrasekhar kicked in 1991 to sign up with father-in-law T.P.G. Nambiar's BPL Systems (a manufacturer of private automatic branch exchange systems). Today, as CEO of BPL Innovision, the man confesses that an unexpected change in the regulatory environment has put him and his company at a disadvantage. For readers just in from Mars, the alteration concerns the issue of fixed service providers (basic telephony companies) offering mobile services through the Wireless in Local Loop (will) platform (Read In a Fix Over WiLL, BT, March 21, 2001). And the timing couldn't have been more inopportune for Chandrasekhar: soon after his company emerged the highest bidder of RPG Cellular's Chennai cellular licence. In the new regulatory environment, as the chief executive of a cellular company rues: ''The licence may not be worth the paper it is written on to the acquirer.'' The acquisition would have-it is on hold right now-made sense. BPL would have added another contiguous circle to its operations in Tamil Nadu and Kerala. It would have helped the company regain its pole position in the industry: latest figures from the Cellular Operators Association of India (COAI) show that Hutchison has become the country's largest cellular service provider with 676,561 subscribers in Mumbai (Hutchison Max), Delhi (Sterling), Calcutta (Usha Martin), and Gujarat (Fascel), edging out BPL (647,553 subscribers in Mumbai, Maharashtra, Tamil Nadu, and Kerala). It would have made BPL only the second cellular company after Hutch to control operations in two metros. And, last (God, it's tough to keep writing in the suppositive), it would have been BPL's first acquisition and transformed the industry's perception of BPL as a slow-moving conservative. The Perception Problem
Maybe there's something to that perception: BPL has never made efforts to increase the geographical scope of its cellular operations, and when it has it's invariably ended up losing out to some fleet-footed opponent. The Madhya Pradesh licence? Lost to Birla-AT&T-Tata. JT Mobile's Karnataka and Andhra Pradesh licences? Did not bid for them. ''The momentum was initially in our favour,'' concedes Chandrasekhar. ''Now, it's in favour of others who've gone in for acquisitions.'' There's a palpable loss of momentum in BPL Infocom's other ventures as well. The internet services arm, BPLnet, is floundering with 70,000 subscribers across nine cities and has scaled down plans to invest in the consumer side of the business. ''We were thinking of setting up consumer portals,'' says Chandrasekhar. ''Now, we don't intend doing any of that.'' The paging company, BPL Wireless has no clear p2p. BPL's radio (read: FM) plans are embroiled in a legal controversy not of its making. Even the cellular company trails behind market leaders Aircel and Escotel in two of the four markets, Tamil Nadu and Kerala, in which it operates. And Chandrasekhar admits that the 26 basic telephony licences BPL Telecom and BPL Cellular have together applied for, are basically insurance against an unclear regulatory picture. At The Crossroads The next two years will decide whether BPL Innovision retains its billing as one of India's biggest telcos or recedes into the background as a marginal player that once had larger aspirations. Still, Chandrasekhar's aversion for the acquisition route-''It is a conscious decision not to pay exorbitant prices the likes of which have been paid chiefly because of the duopoly regime in cellular services''-may, in the long term, work to the company's advantage. The duopoly is history, and dot's decision to award fourth operator licences in the metros and 17 other circles-MTNL, in Delhi and Mumbai, and BSNL elsewhere are the third operators-may provide BPL with a cheaper growth alternative. Then there's the possible merger with Birla-AT&T-Tata, necessitated partly by competitive issues, and partly by AT&T's acquisition of Media One, which controls carrier US West that, in turn, has a 49 per cent stake in all of BPL's cellular operations except Mumbai. AT&T's Country Head Virat Bhatia and BPL's Chairman (Broadband, Internet, and Technology Services), B.K. Syngal, both only say: ''We are in active discussions to find a solution to AT&T's Media One acquisition'', but BT learns that the settlement could take the form of a merger. Ideally, the companies should decide whether to merge before the fourth operator licences are issued. ''There'll be no point in Birla-AT&T-Tata bidding for the fourth Mumbai licence if it can go with BPL,'' says a senior executive in a cellular telephony company. A merger may be the perfect way out for BPL, which doesn't have the financial muscle of a Reliance or a Bharti, and has had to defer the IPO of BPL Communications, the group's telecom holding company. As one Mumbai-based analyst explains, ''BPL hasn't built up a war chest like Bharti by bringing in different partners at different junctures. If it cannot do that, it will be prudent for it to merge with an existing operator.'' Chandrasekhar also seems to have finalised Innovision's long-term strategy: no further investments in paging; an IP backbone, at a cost of Rs 1,450 crore (Rs 450 crore in Phase I) that'll help BPLnet become a force in the corporate connectivity domain; the creation of a new division that'll provide tech-solutions for the mobile internet space; and an entry into the international long-distance telephony business. BPL's cellular base, growing at the rate of 40 per cent annually, generates 2.5 billion minutes of traffic a year. As much as 20 per cent of this is long distance, domestic and international. It makes sense to tap this market potential when VSNL's monopoly on international long-distance telephony is dismantled in April 2002. BPL's first step towards entering this business will be to make a play for the 25 per cent equity the GOI is divesting in VSNL (Syngal, not coincidentally, was once chairman of this company). ''We are part of a consortium that'll submit an expression of interest,'' says Chandrasekhar. Talks are on with France Telecom, its partner in the Mumbai cellular operation, to form this consortium. There will be other bidders in the fray, notably Reliance, but BPL Innovision can't be written off. There's a certain cadence associated with the BPL brand, and Chandrasekhar, to his credit, has become more paranoid now. |
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First, the
news: the adolescent Indian cellular industry may be set for its biggest
merger yet, between BPL and the Birla-AT&T-Tata combine. That's the
high point of what can only be described as the story of a tragedy nearly
averted, that of BPL Innovision's scotched, and now, born-again,
ambitions. But that's getting ahead...
