Hughes Ispat Set To Place Basic Telecom Order On Alcatel
Hughes Ispat is close to sewing up a $480-million (Rs 1,728 crore) telecom equipment supply deal, the first by a basic services licensee in the country, with the French telecom major Alcatel.
Hughes Ispat holds the letter of intent (LoI) for providing basic telecom services in Maharashtra and is a 51:49 joint venture of the Mittals, promoters of steel-maker Nippon Denro Ispat, and US defence and electronics major Hughes Corp.
The supply will be limited to the telephone exchanges and transmission equipment. The deal is expected to be firmed up after Hughes Ispat signs the licence and interconnect agreements with the department of telecommunications (DoT). Sources said that the deal with Alcatel does not include the Karnataka circle, mostly analogous to a state, the LoI for which is also held by Hughes Ispat.
Alcatel is reported to be negotiating with Hughes Ispat for a nine-per cent stake in the company. The transaction is estimated to be of the order of $30 million (Rs 106 crore). On an initial three-year equity of $180 million (Rs 648 crore), this translates into a premium of Rs 8 per share.
Hughes Electronics, an affiliate of Hughes Corp, will supply the local loop solution, the sources said. The local loop connects subscribers to the nearest exchange. It usually uses copper wire or wireless technologies, called wireless-in-local-loop (WILL), or a hybrid solution for the purpose.
Hughes has an in-house wireless solution based on enhanced time division multiple access (E-TDMA) technology, for which it would like to have a domestic market, the sources said. The cost of the Hughes' WILL solution is not known, but is expected to be cheaper than wireline or copper-fiber optic solutions.
The Maharashtra project is expected to cost Hughes Ispat Rs 5,400 crore, the sources said. The company plans to have around 800,000 lines in its network by the end of the third year of operations, according to the plan submitted to DoT. On an expected cost of around $1,200 (Rs 43,200) per line, total equipment cost will be around Rs 3,456 crore.
According to Hughes Ispat chief executive officer John Michael Lind, talks (with Alcatel) were still on.
Other company sources, however, said that the equipment supply contract would be signed after the finer details of the deal are finalised.
We are waiting for the (licence and interconnect) agreements, a top executive said.
Alcatel executives, too, refused to confirm the deal. In reply to a Business Standard questionnaire, Michel Vetil, managing director of Alcatel Modi Network Systems Ltd said, We, Alcatel, are proposing our equipment and services to Hughes Ispat. I have no doubt that other suppliers are also doing the same. As far as I know, Hughes Ispat have not yet taken the decision as to who their supplier(s) will be.
On the reported Alcatel move to pick up equity in Hughes Ispat, Vetil answered, Some operators may propose their suppliers to participate in their equity, but so far, I am not aware that Hughes Ispat have done so.