As reported by The Times of India on Wednesday, all the three parties had entered into a draft memorandum of understanding (MoU) to create the largest cellular joint venture company worth $2 billion. The entity, with over 24 per cent of all subscriber users, will cover 38 per cent of the country's population and 51 per cent of all fixed line telephone users.

While BPL will hold 49.32 per cent stake in the merged company, Birla Tata AT&T combine will hold the remaining 50.68 per cent equity. The merged entity will cover Madhya Pradesh, Chattisgarh, Gujarat, Mumbai, Maharashtra, Goa, Andhra Pradesh, Tamil Nadu and Kerala.

Tata Group chairman Ratan Tata said till a new management structure evolves after the merger, the face of individual companies will continue. On the benefits to customers, Tata said the merged entity will have a common strategy and fiscal discipline which will lead to a synergy for any capital expenditure. The prudent fiscal discipline will benefit the customers, he added.

Describing himself as a first mover for the merger, Tata said the merged entity would gain the benefit of an enterprise that has considerable scale, sharing common benefit, enhance continuous foot print. He said many of the back up operations can be pooled and that benefit can be offered to its customers. Tata pointed out the very smooth and easy transaction between Birla AT&T and Tata. "We expect the same to happen with this merger also," he added.

A V Birla group chairman Kumar Mangalam Birla said the merged entity will expand its operating teams and merger will be effective once the final definitive agreement will be signed.

BPL group chairman Rajeev Chandrasekhar said the real value in the domestic cellular business lies in the South and Western circles. He added, "However we would like to be present in other markets as an investor", hinting at bidding for the fourth licence including in the South and West.

According to draft MoU, BPL group, along with AT&T has agreed to sell their Maharashtra cellular licence after the merger. Both BPL and Birla AT&T operate in Maharashtra creating a conflict of interest. The decision on France Telecom will be taken later.

Rajeev Chandrasekhar said: "It will not be difficult to sell the Maharashtra circle as per the MoU.

BPL has two entities--BPL Mobile Communications Ltd operating in Mumbai with a 74:26 per cent joint venture with France Telecom and BPL Cellular Ltd operating in Maharashtra, Kerala and Tamil Nadu in 51:49 joint venture with US-based Media One, which was acquired by AT&T.

Prior to the merger, BPL group will merge all their telecommunication and related business into a single unit to facilitate the merger between the two companies.

Tata said the survival to cellular business is the scale, size, bigger customer base and rationalising back office support.

Birla said it is a win win situation for the constomer with the introduction of value added services like inter connectivity. He said: "Taking the merged entity to public is one of the many options we have".