|
|
|
| |
            
|
The BPL, Birla-AT&T-Tata merger may be the biggest ever in corporate India, but it could end up not having the desired end-effect.
Everyone seems to have been carried away by the names involved. When the Birla-AT&t-Tata combine merged with BPL Communications in end-June, the pink brigade went to town with screaming headlines: Biggest Merger in India Inc., said one financial daily; Bharti, Hutchison to feel the heat, predicted another; deal to benefit industry, reported a third. And each quoted CEOs of rival cellular service providers saying how, there would eventually be only three to four players in the market. There's little doubt about the numbers mentioned, but there's just a chance, heretical as it may sound, that the new entity doesn't figure among them. We must be joking, right? A corporate with an enterprise value of over Rs 10,000 crore, a customer base of 9 lakh plus (BPL Communications alone accounts for over 5 lakh of these subscribers), and with an equity of Rs 5,600 crore can't just be wished away. Actually, we are as serious as can be. The new company, let's call it b-Tab, will end up with a presence in just one metro circle, Mumbai; four A class circles, Gujarat, Maharashtra, Tamil Nadu, and Andhra Pradesh; one b class circle, Kerala; and have a marketshare of just under 25 per cent. That may seem huge, till you see things at the disaggregated level: in the lucrative metro circles, its share is under 20 per cent; Bharti's is over 28 per cent. It is true that B-Tab will have the financial wherewithal to pose a threat to any other cellular company in India and the company has already bid for fourth operator licences in Delhi, Chennai, and Karnataka where it does not have a presence. Fittingly, it is the capital city that will decide the ultimate winner. It is already the biggest cellular market in the country, and the number of cellular subscribers in Delhi will almost double by the end of 2001. But the process of issuing licences is likely to take six months, and it won't be until late 2002 that B-Tab gets to launch its service in Delhi.
The cost of acquiring this licence won't be too high, especially given the fact that the rollout of the fourth operator and basic service providers, who will be offering 'limited' mobile services on the Wireless in Local Loop (wiLL) platform, could coincide. And by 2002, when (and if) B-Tab starts operations in Delhi, it will be faced with a competition that already has a million subscribers. The deal has gone through smoothly, although there was enough room for protracted negotiations. While Birla-AT&T-Tata and BPL Communications have roughly the same enterprise value and equity, in terms of market share, the latter outpaces the former by a factor of 1.5-odd. ''The relative equity value is kind of abstract. Eventually, the parties involved have to sit together, negotiate, and agree,'' says Sanjeev Aga, CEO, Birla-AT&T-Tata, which will hold a 50.7 per cent stake in the venture. BPL Communications' Rajeev Chandrasekhar should be the happiest with the deal. His company gets to own the single-most significant share, 49 per cent, in the largest cellular operation in the country. But BPL now has to sell its stake in the BPL US West operation in Maharashtra (US West is owned by Media One, which AT&T acquired). Birla-AT&T-Tata runs the other Maharashtra operation, and one entity can't run both cellular operations in any circle-the money that brings in (51 per cent of an estimated Rs 1,200-Rs 1,300 crore) could come in useful. ''This venture will develop into one of the premier institutions of the 21st century,'' exults Chandrasekhar. For a man who once told BT that BPL Communications would consider exiting the cellular business if wiLL went through, that's quite a volte-face. His new-found confidence, perhaps, stems from the merger entity's Rs 5,600 crore enterprise value. But for the merger to pay, the four partners may have to consider looking beyond the cellular domain, and an integrated telecom operation. With the merging entities maintaining that they will compete in the basic services domain, that could take some doing. -Suveen K. Sinha CORPORATE NOTES: CONTROVERSY Seagram India's sale to Pernod Ricard runs afoul of the tax man, who alleges that the liquor company indulged in malpractices. Nothing is more irritating than having gatecrashers at your party. Ask Seagram Manufacturing. It's been seven months since Diageo and Pernod Ricard agreed to buy Seagram's spirits and wine business for $8.15 billion (Rs 38,305 crore) globally. And Seagram in India was in the process of transferring its assets to the new owners, when last month the Department of Revenue Intelligence (DRI) threw a spanner in the works. The DRI had issued a show cause notice to Seagram last December, for allegedly underinvoicing and misdeclaring the value of scotch concentrates and evading Customs duty worth Rs 38 crore over the last five years. Meanwhile, Seagram moved the Patiala Court challenging DRI's authority to issue a show cause. The case is now with the Delhi High Court with a final hearing pending. Among the 60 ''incriminating'' documents cited by the DRI in the show cause notice, some suggest that the liquor supremo also violated the condition of five-year-restriction on repatriation of profits. The investigating agency also cautioned all the customs houses against the transnational's ''devious'' operations. The Nhava Sheva Commissioner in Mumbai, in particular, has been informed as the company recently shifted its import base from Delhi to Mumbai. Seagram continues to import its consignment through Mumbai. The transnational has two manufacturing bases in Meerut and Nasik, and the excise authorities are now in the know of its gross violations. On the flip side, DRI's ''poky'' attitude egged Seagram on to file a petition in the Delhi High Court claiming that since customs had cleared the goods 'provisionally', DRI had no business to slap the show cause. Seagram even cried foul that the adjudicating committee was 'biased'. But given the wide-ranging body of evidence against Seagram, the latter's case is on shaky ground before the final hearing in July. After the show cause, it was time for DRI to slap a prosecution case against Seagram officials-Akram Fahmi, Param Uberoi, Sunil Mehdiratta, and Harvinder Singh Bhatia-who have been accused of personally manipulating documents to evade Customs duty, which works out to be more than Rs 100 crore, including interest and penalty. Looks like this hangover won't lift in a hurry. -Moinak Mitra CORPORATE NOTES: OFF-BEAT Senseless politics makes a victim of Sam Pitroda again.
Pitroda, the man behind the Public Call Office revolution, was supposed to work with two other executives to suggest ways of diversifying railways' revenues. The Pitroda Committee was due to submit its report by year end. Pitroda's suggestion in his rather short tenure included floating an e-commerce and Internet subsidiary, which would look at Internet retailing and offering value-added services to the passengers. He also advocated the setting up of passenger-reservation kiosks in nearly all the 7,000 railway stations, and net connections on board trains. With Pitroda gone, some of these plans will inevitably get shunted. -Ashish Gupta CORPORATE NOTES: OPEN OFFER The brothers V.K. and B.K. Modi will have a tough time convincing investors to sell out at the offered price.
Unlike the tyres they make, the Modis of Modi Rubber Ltd. (MRL) seldom tire generating friction. In the late 80s, financial institutions (FIs) failed to recover their dues as the Modi family allegedly pulled up political clout. Today, brothers B.K. Modi and V.K. Modi are out with an open offer to buy 35 per cent stake in Modi Rubber. And the FIs, who own a hefty 44 per cent of the company, are making the Modis' stomach turn. They claim that the share price being offered by the Modis to stage a buyback is far too less. The Rs 80-per-share offer was to open on May 16, and close on June 14. But it opened only on June 4. Late enough for the FIs to get miffed, gang up and cry for a price revision. However, K. Balakrishnan, head of HSBC Securities, which is managing the offer, thinks the Modis aren't to blame. ''The promoters cannot be held responsible for the delay, since SEBI had sought certain clarifications from them,'' says he. To compensate for the delay, the Modis agreed to revise the offer price to Rs 81.50. But when that price too failed to elicit any response, the Modis finally upped the ante to Rs 90. ''Now this seems to be a reasonable price, considering it is pegged substantially above the current price of Rs 75 per Modi Rubber scrip (at the time of going to the Press) on the BSE,'' points out Jagdish Shettigar, member of PM's economic advisory committee. The FIs don't seem to think so. They have formed their own bloc and even forced a change in the chairman by replacing P. Rai with Pandurang Rao, representative of the Unit Trust of India. What complicates the matter is that there are more owners of MRL. The (Purnendu) Chatterjee Group, for instance, has 13 per cent of the equity and cousin M.K. Modi, 4.5 per cent. About 15 per cent is with the public. Interestingly, the FIs are now keen on tightening the noose around B.K. Modi and make him pay for flouting board norms. So after taking charge, Chairman Rao has handed over the day-to-day management of the company to brother V.K. Modi, driving a wedge in the B.K.-V.K. combine. Until now, the shopfloor operations were being looked after by B.K. Modi while V.K. managed the sales and marketing division. Expect more from this sibling war. -Moinak Mitra CORPORATE NOTES: STRATEGY Saddled with losses, crippling debts, and a loss of consumer confidence, Daewoo Motors India replaces its CEO. But turning around may not be easy.
Young-tae Cho comes with a big reputation. The 51-year-old new CEO of Daewoo Motors India was instrumental in turning around Daewoo's operations in Venezuela, having cut his teeth working in emerging markets from Peru to Poland. So, that's an upside to an otherwise tale of woes of the Korean car company, which recently, for no apparent reason, fired Y.C. Kim, its CEO of 15-months. Cho made his debut with a bang, inviting the media to come and visit Daewoo's $1.5-billion (Rs 7,050 crore) plant in Surajpur, Uttar Pradesh. What he hoped to achieve was a change in consumer perception, which has steadily turned worse over the last two years. So much so that Daewoo's car sales in India have more than halved-from 5,600 in November 2000, to 2,400 in May this year. Says Cho: ''I don't understand what's going on. The consumer apprehensions are unfounded, and based purely on rumours. We have invested more than $1-billion (Rs 4,700 crore), and are here for the long haul.'' But with a parent that's buried under a $15 billion (Rs 70,500 crore) debt, and has been under court receivership for the past eight months, it's getting harder to convince consumers. Worse, with losses mounting in the local operations (losses for 2000-01 were Rs 340 crore), the banks and financial institutions might want to pull the plug, cutting off Daewoo's air-supply. The hopes of Daewoo and the lenders rest on General Motors buying the ailing parent in Korea. If that happens, then GM may be able to merge its Indian subsidiary with Daewoo's and build its weak presence in the market. Says a senior executive at a Delhi-based FI: ''Even if the GM deal takes place at 30 cents to a dollar (they're actually talking about 60 cents to a dollar), we are covered, although there could be delay in repayment.'' Meanwhile, Daewoo has approached the FIs to reschedule its long-term debt, and apparently some of them are favourably inclined, given the assets on the ground. For now, Cho is busy putting the house in order. He's frozen advertisements, and put all launches under review. And if the GM deal comes through, that may just be the kick-start he needs. -Ranju Sarkar
|
|||||||||||||||||||
|
Issue Contents Write to us Subscription Syndication INDIA TODAY | INDIA TODAY PLUS | COMPUTERS TODAY |
TEENS TODAY
© Living Media India Ltd |
 |
 |
You can't keep a good man down, unless of
course it is politics at work. Sam Pitroda, who was brought into Rail
Bhawan this February by former Rail Minister, Mamata Bannerjee to suggest
ways to modernise the Railways, was eased out unceremoniously last month.
