The Ruias of Essar have rejected an offer by the Aditya Birla group's Idea Cellular to acquire BPL Mobile's Mumbai circle, which lost heavily on its valuations due to the corporate battle between its shareholders.

Sources said Idea Cellular, which was due to launch its Mumbai operations, was interested in buying BPL Mobile due to the crucial spectrum available with the company, a ready subscribers' base and infrastructure.

Idea now plans to roll out its Mumbai operations as soon as it gets the spectrum from the government.

An Essar spokesperson refused to comment on the issue but the company insiders said they had received an offer from the Aditya Birla group but did not take the talks further. "We have received feelers from the Birlas but we are now focusing on rebuilding the company," a source said.

Idea Cellular's managing director Sanjiv Aga said, "We did not have any discussions with the Ruias on this issue."

Essar insiders said the immediate priority for the group now was to invest in BPL Mobile so that its valuation could keep pace with the industry leaders. "In the last two years, the valuations in the industry grew by four times but in the BPL's case, the valuations were up only marginally."

Due to lack of investments in marketing and technology, BPL Mobile could add only 3,583 subscribers in December against 32,402 subscribers by Hutch and 92,161 subscribers by Airtel, data by Cellular Operators Association of India showed. In the last one-and-a half years, BPL Mobile's Mumbai circle's valuation was up only 20 per cent from $500 million.

The Ruias, however, do not rule out the possibility to sell the standalone company once the valuation of the circle improves. "We would look at all the options if we get a better valuation. Till then, we are not selling out," an Essar official said.

Ruias don't want to sell as BPL presently has 10 MhZ spectrum, which they don't want to lose to competition. They also don't want to merge BPL with Hutch-Essar, at least till there is a change in spectrum policies.

The present spectrum policy prevents a company from holding more than 15 MHz spectrum in a single circle. Hutch owns 10 Mhz and BPL another 10 Mhz, which means that the company will have to surrender 5 Mhz of spectrum to the government.

Apart from losing the spectrum, surrendering also means losing the coveted spectrum to competition. BPL Mobile, which was one of Mumbai's first cellular service providers, failed to keep pace with the industry in the last three years as founder Rajeev Chandrasekhar had differences of opinion with his father-in-law and the BPL group patriarch, T P G Nambiar, over shareholding.

The battle between Chandrasekhar and Nambiar took toll on the company's investments and it lost ground to newcomers.