While the recent completion of Vodafone’s $11.1 billion acquisition of Hutchison Essar has created a sense of closure, there is still some unfinished business.Namely, what is to happen to BPL Mobile?
According to news reports, the Essar Group is targeting to sell BPL Mobile for $1 billion. A final decision on the sale will be taken in July 2007, when the promoters of the Essar Group, the Ruias, expect to conclude their ongoing arbitration on the matter with Hutchison Telecom International Limited.
There is speculation that Idea Cellular and Maxis Communications may be potential buyers for the company, which operates in the Mumbai circle and has 10 MHz of spectrum. According to analysts, for players like Idea and Aircel, which have yet to gain a foothold in Mumbai, BPL Mobile is an ideal fit.
Background
In July 2005, the Ruias bought the four circles of BPL Communications (Mumbai, Maharashtra, Tamil Nadu and Kerala) for an enterprise value of $1.1 billion. The idea was to merge them into Hutchison later, which would in turn pay Essar in cash.
The deal for three circles ?? Maharashtra and Goa, Tamil Nadu and Kerala ?? was concluded in January 2006.However, Hutchison-Essar could not obtain the necessary approvals to merge the Mumbai cirlce as per the agreement. In September, Essar-owned BPL Communications terminated the sale of its Mumbai circle, BPL Mobile, to Hutch.
Consequently, the disagreement was dragged to court, after which Hutch washed its hands off the entire ordeal and sold its stake in Hutchison Essar.
Recent initiatives
Meanwhile, the company has been struggling to improve its performance and attract additional subscribers. In a bid to increase usage, BPL has expanded its network capacity by approximately 75 per cent, investing Rs 2 billion towards the expansion as well as installation of an intelligent network system.
The company has also increased its cell sites from 570 to over 900. By the end of calendar year 2007, BPL is targeting 1,300 cell sites.
At the same time, it has slashed tariffs.This was essential in order to keep up with the intense price war being waged within the telecom industry. BPL recently launched its lifetime prepaid plan at Rs 444, the lowest in the country. In fact, BPL Mobile was the first cellular service provider to cut lifetime rates to Rs 666.
The company has also launched several new value-added services. For instance, its new voice SMS service enables BPL users to send a spoken message to any mobile subscriber.Such efforts have translated into increased customer satisfaction. According to a study conducted by the Telecom Regulatory Authority of India (TRAI), BPL Mobile beat pan-Indian players such as Bharti Airtel and Mahanagar Telephone Nigam Limited in delivering the highest user satisfaction in the Mumbai circle.
The company topped the satisfaction score (99 per cent) of overall customer satisfaction. It received 98.5 per cent for voice quality, and 99 per cent and 100 per cent for its billing performance in postpaid and prepaid services respectively.
In fact, BPL Mobile is one of the very few cellular service providers to have met all the benchmarks on quality of service parameters set by TRAI.
Some concerns
Nevertheless, despite rigorous efforts, BPL Mobile’s user base has declined over the past year. The one-time leading operator in the circle has lost out considerably in the subscriber race. During the period April 2006 to May 2007, its subscriber base declined from 1.3 million subscribers to 1.08 million. According to the company, this is on account of the cancellation of subscriptions as per TRAI’s verification guidelines.
It has the lowest market share in the Mumbai circle behind Hutchison Essar, Bharti Airtel, Reliance Communications, Mahanagar Telephone Nigam Limited, and Tata Teleservices. This marks a significant deterioration in its status considering that in April 2006, the company boasted the third largest user base in the circle.
The road ahead
Regardless of its ownership tussle, BPL Mobile is looking at busy times ahead. “Our endeavour has always been to give customers the best. This will continue in the future. BPL Mobile has transformed the mobile communications industry in India with its state-of-the-art technology, which includes its unique network design, the Qualnet, Camel Phase 2 Intelligent Network platform and GPRS. The company also provides cutting-edge services like multimedia messaging, mobile browsing and Java-based mobile games,” says S.Subramaniam, CEO, BPL Mobile.
