Skycell Owners Plan Mass Exit

Chennai cellular operator Skycell Communications is up for sale, with all the company's promoters seeking to pull out. ABN Amro Bank has been mandated to find buyers, sources said here yesterday.

The promoters of the cellular company are the Thapars, who hold their 40 per cent stake through group company Crompton Greaves; the Satwant Singh-owned DSS (11 per cent equity); and foreign investors Emtel (24.5 per cent) of Mauritius and Bell South (24.5 per cent) of the US.

When contacted, Skycell executives declined to comment on the sale plans. Key Thapar group executives could not be contacted because they were out of town. Cellular industry sources, who have been offered the licence, confirmed the sale offer.

 

The exit plans of Skycell promoters are indicative of the financial strain that cellular investors in India are under. The industry is reportedly making cash losses (gross profits net of interest, amortisation and taxes, but excluding depreciation) to the tune of Rs 400 crore a month.

Skycell made an operating profit of about Rs 1 crore last year. However, the company's cellular subscriber-base has been stagnant for some months now. It has been hovering around 22,100 users since March till June, though this is reported to have increased since.

The exit plans also show the disenchantment of US investors with the Indian cellular market. Regional Bell operating companies (or Baby Bells) like Bell Atlantic and Nynex have not hiked stakes in ventures with Essar and Reliance. US West (a joint venture partner with BPL) scaled down its India plans when it decided to close down its representative office here.

When the sale is concluded, it will be the third deal in Indian cellular industry which will mark the total exit of original promoters. The earlier two deals which witnessed a complete buyout of the Indian promoters' stake were the Essar-Swissom deal in Sterling Cellular and the Max-Hutchison contracts.

The Essar-Swisscom deal happened in stages. In the first deal, the Ruias of the Essar group sold 33 per cent equity in Sterling Cellular _ the cellular licensee in Delhi and the controlling stake-holder in Aircel Digilink _ to Swisscom in 1995. The Swiss company later decided "in-principle" to hike its stake to 49 per cent directly in the company.

Simultaneously, as part of the deal, the $12 billion European telecom major also acquired control over three cent equity in Sterling Cellular. This gives it shareholder and management control in the company. It is, however, yet to bring in the funds into the company.

In the Max-Hutchison deal in Hutchsion Max Telecom, Max India sold out to Hutchison Whampoa of Hong Kong for Rs 563 crore (some $130 million). The latter acquired control f the company through the deal by hiking its stake from 49 per cent to nearly 70 per cent.