None of Rajeev Chandrasekhar's detractors-the list includes his father-in-law T.P.G. Nambiar, who accuses him of wrongfully wresting control of BPL Communications, investors such as Actis (formerly CDC), who have issues with the way he operates, and investment bankers who have sniffed around and walked away claiming that no buyer would be interested in a BPL Communications in which the man has a residual minority stake-would accuse him of stupidity. After all, the 40-year-old once worked for technology blue-blood Intel before marrying into the BPL Group (his wife is TPG's daughter Anju) and taking it into the telecommunications space.

Chandrasekhar is also no stranger to greatness. For a while, BPL Mobile Communications and BPL Mobile Cellular, the two telcos that come under the BPL Communications umbrella (the first operates in Mumbai; the second in Maharashtra, Tamil Nadu, and Kerala) were among India's hottest firms, and Chandrasekhar and Sunil Mittal, CEO, Bharti Tele-Ventures, now India's largest mobile telephony firm, were Indian telecom's original glimmer twins. Then, everything went to pieces: a proposed merger of BPL with the Birla-Tata-at&t combine (since christened Idea Cellular) fell through; some investors dragged Chandrasekhar to court; two foreign partners, France Telecom and AT&T Wireless exited; the company inexplicably chose to sit out the bids for the fourth cellular licences (this would have enabled it to enter new markets); and TPG, the patriarch of the BPL Group, alleged that Chandrasekhar had wrested control of the mobile telephony business through unfair means.

In some ways, it is a measure of Chandrasekhar's intelligence that he is willing to abandon his and his company's pursuit of greatness-BPL has a less-than-five per cent share of a market dominated by biggies such as Bharti, Reliance Infocomm, BSNL, and Hutch-for a price that will benefit all shareholders (as its single largest shareholder, he will gain too; see Who Owns What). "I am flexible in terms of how much I am willing to divest," he says. That could even be his entire stake, anything between 36 per cent and 37 per cent, according to estimates available with this magazine.

All Chandrasekhar is willing to divulge is that together, he, ICICI Bank and others hold a 72.32 per cent in BPL Communications and that companies controlled by TPG do 7.25 per cent. In October 2004, around the time TPG wrote to the Company Law Board (CLB) about Chandrasekhar's alleged infractions, the latter's camp claimed TPG owned 13.27 per cent of the company. Between then and now, BPL Communications has had a rights issue to which TPG and the foreign shareholders (they held a 37.4 per cent stake in the company in October) have not subscribed. For the record, in October, the TPG camp claimed that companies controlled by TPG held a 30.18 per cent stake in BPL Communications.

On May 11 this year, the CLB dismissed Nambiar's petition requesting it to restrain the sale of any stake in BPL Communications, paving the way for Chandrasekhar to go ahead with his search for a strategic investor, as he chooses to term it, or a buyer, as most investment bankers do. The main petition is slated to be heard around the time this magazine goes to press. "I do not want to disrespect someone older (than me, but) there is no merit in his allegations," says Chandrasekhar. TPG declined to comment on the issue since it was "sub judice".

The Essar Group has emerged the frontrunner for part, or all, of BPL Communications Essar Chairman Shashi (L) and Vice Chairman Ravi Ruia

What Is It Worth

BPL Communications, the buzz on deal street goes, has been in play some time. From global telcos such as Sistema, Vodafone and Orascom to Indian firms such as Essar Teleholdings Limited (ETHL), everyone is said to have looked at BPL. "Everyone who is interested in Indian telecom is talking to us," says Chandrasekhar, not a little cryptically.

Investment bankers in the know put BPL Communication's enterprise value at around $1 billion (Rs 4,400 crore), a number that Chandrasekhar confirms. A little less than half that number (Rs 2,000 crore) is accounted for by debt. Going by the current valuation of Bharti Tele-Ventures (market capitalisation of Rs 44,750 crore on July 7 and 12.25 million subscribers as on June 30, 2005), BPL Communications, with 2.6 million subscribers, should be worth just under Rs 10,000 crore; investment bankers say the actual valuation would be closer to Rs 4,000 crore given the company's limited reach and track record. Together, BPL Communication's two subsidiaries, BPL Mobile Communications and BPL Mobile Cellular, boast revenues of Rs 1,012 crore.

In some ways, the BPL deal is pretty straightforward: a small telco with just over 2.6 million subscribers realising that it cannot really compete with larger telcos boasting all the accompanying benefits of scale and money-power. "It will be difficult for them to scale up and to that extent, a strategic investor is required. Besides, a pan-India presence is important for any operator," says a telecom analyst at a foreign brokerage.

In other ways, it (the deal) is anything but. For one, the shareholding pattern of BPL Communications is the subject of debate, conjecture and a petition before the CLB. For another, Chandrasekhar and foreign investors in the company have rarely seen eye to eye. For instance, when BPL Communications announced its merger with the Birla-Tata-at&t combine, Actis (then CDC) went to court to scotch the deal on the grounds that its approval had not been sought before the announcement.

That is just the kind of red flag potential investors hate. "There is complete unanimity on bringing in a strategic partner," says Chandrasekhar, insisting that his relationship with the foreign investors is much better today.

Will these investors exit as part of the deal? No one is saying anything. While Actis declined to comment stating that the matter was sub-judice, none of the other foreign investors responded to queries from BT.

Investment bankers are not sanguine about BPL's prospects of attracting a strategic partner. "It is a complicated structure and there are too many people involved," says one. Chandrasekhar, who earlier this year retained i-bank J.M. Morgan Stanley to find a strategic partner, remains confident that he can find one, an Indian telco, a foreign telco seeking to enter the Indian market, or one or several financial investors.

Leader Of The Pack

As this magazine goes to press, ETHL has emerged the frontrunner in the race for part, or all of BPL Communications. The company already has a 30.42 per cent stake in Hutchison-Essar (recently increased from 26.99 per cent) and, late last year, acquired a 9.99 per cent stake in BPL Mobile Communications from France Telecom; the latter held a 26 per cent stake; the remaining 16.01 per cent went to Asia Pacific Systems, a foreign investor that no one seems to know too much about with the general consensus in investment banking circles being that it is probably an offshore company holding the stake on behalf of an Indian firm that doesn't want to be associated with the deal for fear of attracting regulatory ire.

That number (9.99 per cent) is significant because the current regulatory regime states that a company with a stake higher than 10 per cent in a telco offering services in a circle can have, at the most, a 9.99 per cent stake in another telco operating in the same circle. Thus, although Vikash Saraf, CEO, ETHL, admits "discussions have taken place" (he adds that "no agreement has been reached") he is silent on how the company hopes to deal with the 'intra-circle' issue. Even if Essar decides to use a vehicle other than ETHL for the acquisition, it would run into problems. For instance, Idea Cellular's deal to sell 47.7 per cent stake to the Singapore Technologies Telemedia (STT)-Telekom Malaysia combine was rejected by the government since STT is a 100 per cent subsidiary of Temasek that owns a 65 per cent stake in Singapore Telecom, which, in turn, holds a 30 per cent stake in Bharti which operates in the same circles as Idea. Still, there is no denying the fact that BPL Communications would fit neatly into the greater Hutchison-Essar, ETHL, Essar gameplan (see The Essar Gameplan).

Business As Usual

Deal or no deal, Chandrasekhar says BPL Communications will invest Rs 675 crore in the two cellular operations by March 2006. The money, he says, will come completely from internal accruals. "In 2004-05 we had an EBITDA of Rs 407 crore," he adds, touting the healthy operating profit as sign of the company's well-being. The decision to carry on with business as usual, while trying to strike a deal comes from experience. Between 2001, when the MoU (memorandum of understanding) for the merger of BPL Communications with the Birla-Tata-at&t combine was signed and 2003, when it finally became evident that the deal had fallen through, BPL did not make any significant investments in its operations. "There was no fund-raising during this period," says Chandrasekhar. "Nor did we bid for the fourth operator licence anywhere."

The results of that strategic inertia are evident. In June 2001, BPL boasted 150,000 subscribers in Maharashtra as compared to market leader Birla-Tata-AT&T's 167,000. Today, BPL has just under 560,000, while Idea Cellular has 1.43 million. Even late entrants such as Bharti and BSNL have forged ahead of the company.

The story of declining market shares has been played out across all circles where BPL operates with the exception of Mumbai, where it has been able to hold its own. Even here, however, BPL Mobile has lost some ground. It was marginally ahead of Hutch at the end of June 2002. It had 5.08 lakh subscribers then, while Hutch had 5.03 lakh. Today, Hutch boasts 1.53 million subscribers in Mumbai, while BPL has 1.24 million.

Chandrasekhar rues the fact that the merger did not go through. Had it gone through, he may have well been the CEO of a telco as large as Bharti and, given the fact that Chandrasekhar was already speaking of an initial public offering for the merged entity, as valuable. "It is important to learn from your mistakes but the objective for me has been to focus on tomorrow. There is no question of being bitter," says Chandrasekhar who claims there is no bitterness on his part towards foreign investors who were partly responsible for the failure of the merger.

That, though, is in the past. Today, Chandrasekhar is focussed on finding an investor, even a buyer. And this time around, he is clear he will not insist on managing BPL Communications. "I will do what is good for the company," he says. "I want a partner who can take the business further." That's smart.