Unperturbed by the legal battle between Vodafone and Essar, BPL Mobile has appointed two merchant bankers as advisors to divest a majority stake in Loop Telecom, the wholly-owned subsidiary of BPL Mobile.
Loop Telecom has GSM licences in 21 circles and has already received spectrum in seven circles. The company expects to divest up to 74 per cent stake at a valuation of about $2 billion.
The merchant bankers are Citigroup Global Market India, Citibank's investment banking arm, and Standard Chartered Bank as advisors
The Essar group directly owns 9.9 per cent stake in BPL Mobile while another 16.1 per cent is owned by Mauritius-based Capital Global. The remaining 74 per cent stake is owned by BPL Communications.
“Essar is informally in talks with Bahrain Telecommunications, among other players. The advisor has valued the company at $2 billion,” investment banking sources said.
"However, it will take a while before the deal consummates as there are at least five players in the market looking for foreign partners," said a leading investment banker advising one of the companies. “When so many options are available in the same sector and of similar nature, potential suitors take more time as they evaluate each proposal,” he added.
“Foreign telecom players are talking to almost every one these companies in trying to bring down the valuation, which is causing the delay. As a result, the difference between the expected and the offer price is substantial,” the chief executive of a private equity firm said.
The divestment of majority stake by Essar would also help it in the legal battle with Vodafone as it would give management control to the foreign player. Following the divestment, Essar would be the passive investor in Loop Telecom.
Telecom operators, such as Unitech, Datacom Solutions, and Swan Telecom, among others, have appointed advisors for the purpose. Leading foreign investment banks UBS and Deutsche Bank are working for Unitech and Swan Telecom, respectively.
Unitech has already raised Rs 2,000 crore, including debt of Rs 1,200 crore and another Rs 800 crore via a bank guarantee to start its mobile telephony roll out. Sources said that the company is aiming to raise about $1 billion by divesting less than 50 per cent stake, thereby valuing the company at $2.5 billion. “The next round of funding will be through the equity route,” said a senior company official.
Swan has nearly finalised a deal to sell 51 per cent to UAE-based Etisalat at a valuation of $1.7 billion.
Sources close to the transaction said that it would take another month to conclude the deal. Norway-based Telenor is in discussions with Videocon to pick up a majority stake in Datacom.
