Hughes, Tata Tele Merger Tuesday

Hughes Tele.com India and Tata Teleservices will make an announcement on the combination of their respective Maharashtra and Andhra Pradesh basic telecom circles on Tuesday.

"Since we are still in the process of fine tuning the amalgamation agreement, a joint announcement is expected tomorrow," a top Hughes Tele.com executive told Business Standard. However, the executive declined to comment on the nature of the agreement.

But the proposal involves spinning off the Andhra Pradesh circle of Tata Teleservices and merging it with Hughes Tele.com. The Tatas would then retain Tata Teleservices as the holding company for its basic and other telecom businesses. This means that the two companies will not be merged into one company, said sources.

The Tatas are likely to hold about a 40 per cent stake in Hughes Tele.com after combining the operations, while the remaining 60 per cent equity will be held by Hughes Network, the Ispat group firm, the financial institutions and the public. In effect, the Tatas will be the largest shareholder in Hughes Tele.com.

When contacted, senior Tata executives declined to comment on the issue as they are yet to finalise the agreement. Senior executives of Hughes Network Services of the US and Hughes Tele.com India held a final round of discussions in Mumbai on Monday to finalise the strategic alliance.

Talks were held at Hughes Tele.com's headquarters after its board meeting to declare the company's quarterly results.

Following the amalgamation, the Tatas will have a foothold in Maharashtra (including Mumbai ), one of the more lucrative circles, in addition to the AP basic circle. For Hughes Tele.com, which has never expanded its business in other parts of India, getting a strategic partner will be a boon, according to analysts.

Tata Teleservices has already announced that it will develop four new basic circles by investing around Rs 5,000 crore over a period of 5-7 years. It may also enter the national long distance telecom business.

Hughes Tele.com is expanding its network in Maharashtra and currently offers basic services in 10 cities. Hughes Tele.com expects its total investment in Maharashtra project to grow to Rs 3,480 crore by March 2004.

Hughes Tele.com is adopting a broadband network strategy by connecting customers with optic fibre cable, offering them high bandwidth availability. It will shortly provide advanced intelligent network services.