Extreme Telecom To Invest Rs 75 Cr In Mcl

Extreme Telecom -- an affiliate of California-based telecom company PortaCom Wireless, -- plans to invest Rs 75 crore in Microwave Communications Ltd (MCL), the Himachal Futuristic Communications Ltd (HFCL) paging company. The investment is being made at a premium of Rs 120 per share, sources said.

The Extreme Telecom investment will be through purchase of 49 per cent equity of a holding company floated by HFCL to finance its equity in MCL. PortaCom will effectively hold 65 per cent equity in the company. The proposal is yet to be cleared by the Foreign Investment Promotion Board.

MCL chairman and managing director, Deepak Malhotra, told newspersons here yesterday that HFCL would retain management control in the company. "PortaCom will nominate the chairman, but the managing director will be ours and we will control daily operations," he said. He was not willing to confirm the premium on the transaction.

 

The Rs 75 crore investment will go into the reserves of the paging company and be used to finance its expansion plans in the seven cities and three circles it holds licences. MCL -- operating under the Pagelink brandname -- is one of the operators in Delhi, Mumbai, Ahmedabad, Calcutta, Vadodara, Surat and Rajkot, besides Uttar Pradesh (east), Bihar and Orissa.

The current shareholding pattern of MCL is: HFCL 56 per cent, Thai telecom major Shinawatra 40 per cent and a non-resident stake of four per cent. PortaCom has bought out the entire 40 per cent Shinawatra stake and the four per cent NRI holding.

The PortaCom-Shinawatra deal is reportedly worth some Rs 35 crore. This works out to a premium of about Rs 30, sources added.

The 44 per cent holding of Shinawatra and NRIs in MCL together work out to about Rs 11.88 crore on a Rs 27 crore equity.

Under the new shareholding pattern, HFCL will hold 14 per cent directly in MCL. To finance its remaining 42 per cent, HFCL is floating a holding company, 49 per cent of which will be sold to Extreme Telecom. This stake (about Rs 5.56 crore) has been sold for Rs 75 crore, sources added.

Sources said the equity sale and recast was being implemented to raise adequate finances for future operations of MCL. Setting up networks in Uttar Pradesh (east), Bihar and Orissa is alone expected to cost about Rs 35 crore. The company's existing operations in seven cities also require considerable investments to sustain expected losses.

MCL makes losses of about Rs 1.5 crore per month in these cities.

This is expected to continue until the company's subcriber base grows to about 150,000 from the current 80,000. This 'breakeven' subscriber base is expected to be reached late this year.

The equity recast plan was revealed by Malhotra at the launch of bilingual paging services -- in Hindi and English -- by the company here yesterday. Pagelink has also launched bilingual services in Maharashtra (Marathi and English as well as Hindi and English) and Gujarat (Gujarati and English).