Vodafone, Essar in race for BPL Mobile stake

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While Vodafone could buy 74%, Essar could hike its stake from 10% to 100%.

The race for a strategic stake in BPL's mobile business has narrowed down to two competitors, Essar Teleholdings Ltd and Vodafone Inc.

While Vodafone could buy up to 74 per cent in BPL Mobile, which operates cellular services in Mumbai, the Ruias of Essar could raise their stake in the company from 9.99 per cent at present to up to 100 per cent.

The sale was likely to be finalised by the next month and was expected to include infusion of fresh capital.

"We are negotiating to sell 51 per cent, 74 per cent or even 100 per cent, depending on the valuations. We are also negotiating for infusion of fresh capital into the company," a company executive said.

The sale could be either through the holding company, BPL Communications, or the two operating companies, BPL Mobile Communications and BPL Mobile Cellular Ltd.

It will not be easy for the Ruias to raise their stake in BPL Mobile as the Department of Telecommunications' (DoT) regulations do not permit a company to own more than 10 per cent in competing operators in the same circle.

"If DoT regulations do not permit stake sale to Essar Teleholdings, our option would be to go for Vodafone," the executive said.

"If the Ruias take a 100 per cent stake in the company then they have a strong case of getting approval from the government for the acquisition as then the question of holding over 10 per cent stake in a competing player could be nullified," the executive added.

It is learnt that Nimesh Kampani was handling the negotiations on behalf of Rajeev Chandrasekhar. The prices and the quantum of the stake to be offloaded will depend on the valuation of the company and the prices offered by prospective buyers. The expansion capital will be needed for the mobile business plans for 2006-07.

"For the current year, internal accruals of Rs 675 crore were being used to fund capital expenditure. In 2006-07, a much higher amount will be required for the company to bid for fresh licences and expand operations. This is likely to be funded partly through issue of fresh capital," a company executive, said.