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Rediff News  All News  » Business » Ruias apply for telecom licence via BPL Mobile

Ruias apply for telecom licence via BPL Mobile

September 08, 2007 00:57 IST

Joining the rush of companies looking for spectrum, BPL Mobile has applied for a unified access service licence in 21 of the country's 23 telecom circles.

The company was acquired by the Ruias of the Essar group from Rajeev Chandrasekhar in 2005.

The group has applied for the licence through, a wholly-owned subsidiary of BPL Mobile, which provides GSM services in Mumbai and has over 1.1 million subscribers.

The licence application raises questions over the Ruias' relationship with Vodafone in Essar-Vodafone, formerly Hutch-Essar, the country's fourth-largest operator. Essar has a 33 per cent stake in the telecom service provider, in which Vodafone recently bought Hong Kong-based Hutchison Telecom's shareholding.

Vodafone-Essar executives declined to comment on the issue, but sources close to the deal said the move was unlikely to go down well with the UK-heaquartered company.

As part of an agreement with Hutch, BPL was to be merged with Hutchison-Essar, but differences between the two partners put that deal under arbitration.

The Ruias own 10 per cent in the company, the rest being held by friendly investors, which keeps it within telecom licensing norms that stipulate that a promoter of a telecom company cannot have more than 10 per cent equity in another operator in the same circle (Vodafone-Essar has operations in Mumbai and 19 other circles).

The proposal to seek a separate UASL, which allows operators the freedom to use both telecom technologies (CDMA or GSM), does not legally violate the Ruia agreement with Vodafone.

BPL was kept outside the purview of that deal owing to the arbitration between Essar and Hutchison. While this implicitly means that BPL could chart its own course of action, sources close to the deal described the move as "against the spirit" of the Essar-Vodafone deal.

Explaining the reason for filing the application, BPL Mobile Communications Director and Chief Operating Officer S Subramaniam said: "We have a sizable presence in Mumbai, but need to have a strategic roadmap for growth, and need a larger footprint to derive economies of scale and cost synergies in this highly competitive market. Expansion into new circles would meet both these objectives."

Sources close to the two partners pointed out that a UASL would also enhance BPL Mobile's value if the new merger rules suggested by the industry regulator are implemented.

The proposal removes the 15 MHz cap on spectrum for a merged entity.

The deal could help Vodafone-Essar Ltd, which is facing a major crunch in additional spectrum allocation.

"If BPL gets a licence and also spectrum and then merges with Vodafone-Essar as was planned earlier it will get additional 6.2 MHz of scarce spectrum (which is the allocation committed when a licence is given).

That, however, might be tough since there is a long queue ahead of the Ruias.

A Ruia source said the group expected priority as existing operators over other applicants.