Teleservices Limited (TTSL) today announced that
it had executed agreements with Hughes Network
Systems (HNS), the Ispat Industries and Alltel
Corporation, the principal promoters of Hughes
Telecom (India) Limited (HTIL), to acquire 50.83
per cent of the paid-up equity capital of HTIL
from the HTIL sonsors.
acquisition would be subject to the necessary
statutory / regulatory approvals and is expected
to conclude in early October. A public announcement
under the SEBI takeover code would be made within
the prescribed time.
the acquisition, Tata Sons chairman, Ratan N Tata,
said, "The acquisition of HTILs services
in Maharashtra, which includes Mumbai, will enable
speedier implementation of the groups plans to
provide world-class telecom services to the Indian
Tata Groups acquisition of HTIL is the latest
evidence of its ambitious plans in Indias high-growth
telecom industry, where revenues are expected
to increase more than three-fold this decade --
Rs 40,000 crore currently to over Rs 125,000 crore
by 2010. The group had earlier acquired VSNL in
February this year and, in 2001, merged its cellular
operations with Birla AT&T to create BTAL.
The group has already spent over Rs 6,500 crore($
1.3 bn) on its telecom projects and has committed
to spend over Rs 10,000 crore ($ 2 bn), making
it the second largest investor in telecom after
the government behemoths, BSNL and MTNL. The groups
ambitions in telecom straddle the entire range
of telecom services international and national
long-distance (through VSNL), basic services
including limited mobility, value-added services
and Internet (through TTSL, Tata Internet Services
and VSNL), and cellular services (through Idea
Cellular, earlier known as BTAL).
consideration for the acquisition of 71.43 crore
equity shares of HTIL, TTSL will issue 71.43 crore
redeemable non-cumulative convertible preference
shares (RPS) of TTSL in favour of the HTIL sponsors.
These RPSs have a face value of Rs 10 and carry
an interest coupon of 0.1 per cent and are redeemable
either at the end of 51 months at a price of Rs
8 and or at the end of 75 months at a price of
Rs 10. Tata Sons has provided a put option for
the redemption of the RPSs.
HTIL will be restructuring the debt owed by HTIL
to HNS. Part of the debt owed by HTIL to HNS will
be rescheduled as long-term debt. Also, HNS will
partially transfer its HTIL receivables to TTSL
in exchange for RPSs and warrants of TTSL. DSP
Merrill Lynch acted as sole advisors to the Tatas
on the transaction and ICICI securities acted
as advisors to HNS.
will also be making an open offer for a further
20 per cent of HTILs equity from its other shareholders.
The offer will be made at HTILs six-month average
price since the consideration paid to HTILs shareholders
in the form of RPSs has a net present value which
is less than HTILs six-month average price. Going
forward, TTSL intends to realign and restructure
the debt profile of HTIL to provide funds required
for the Maharashtra Circle at more favourable
rates of interest. TTSL would also implement CDMA
technology to enable HTILs customers to have
limited mobility through wireless in local loop
(WiLL) and other value-added services.
Teleservices is the Tata Groups vehicle for basic
services. HTILs acquisition is an important milestone
in TTSLs plans to have a pan-India presence and
to invest around Rs 9,000 cr in the next four
years to achieve a subscriber base of 3 million
by 2006. With the acquisition of HTILs 170,000
subscribers, including 120,000 subscribers in
Mumbai, TTSL acquires an immediate presence in
Maharashtra rather than entering Maharashtra as
a competitor to HTIL and building up its presence
over several years.
the acquisition of Maharashtra, TTSLs operations
will comprise six category A telecom circles (Andhra,
Karnataka, Tamil Nadu, Gujarat, Delhi and Maharashtra,
including Mumbai). These circles currently comprise
56 per cent of Indias subscriber base and 65
per cent of the countrys telecom revenues.
Network remains committed to India with an established
and growing presence and interests in communication
software development and services and broadband
communication services over satellite. India continues
to remain a critical and important part of Hughess
global business plans. Its decision to divest
its stake in HTIL in favour of TTSL, made in the
best interests of the company and its stakeholders,
is in continuation of its plan to focus on the
satellite broadband market in India in line with
its worldwide focus.
currently provides communication services to over
650 cities and towns in India and satellite broadband
services to 39 of Indias top 50 brands. In March
2002, Hughes had launched its nation-wide Direcway
satellite broadband services and announced the
establishment of the Spaceway software applications
development centre in Bangalore. The launch of
its $ 2 bn Spaceway satellite access and services
platform is scheduled for early 2003 in North
America and in Asia in the following year.