Mumbai: The Rs. 38,000-crore Tata group is floating a new company that will be its flagship for its infocom business in much the same way as Tata Steel led its foray into manufacturing a century ago. Three Tata group companies – Tata Power, Tata Industries and probably Tata Steel – are contributing Rs.700 crore as the initial paid up share capital of the company that will house all consumer-led telecom servies.

The decision to float the as yet ‘nameless’ company was taken after an initiative by the Group Executive Office (GEO) headed by Ratan Tata, chairman of Tata Sons, to bring all the consumer-interfacing telecom businesses under one corporate structure with a common brand.

The decision represents a major change in the strategic approach of the 130-year-old group which has thus far been a loose confederation of companies. This is the first time that the Tatas’ entry into a new business(telecom) is being choreographed centrally by the Group Executive Office.

Bombay House officials say that the infocom business will become the group’s biggest activity by 2010.

In this context, it is learnt that the GEO is of the view that a single legal entity will have the focus to be able to drive the group’s agenda in its customer-oriented infocom businesses. The new company will create a standalone brand, which will be used across the gamut of services.

It will house all Tata telecom businesses which interface with the consumer, apart from the cellular business of the Batata-BPL combine, which will remain separate with its own brand. Other services like basic telephony, internet service provider, national long distance services and international gateways will be housed in this company. All these businesses will operate within the same geographical footprint covering 70 per cent of India’s population, which has been mapped out by Bombay House.

The existing businesses, like Tata Internet and Tata Teleservices, could be merged into the new company, said sources, adding that no firm decisions had still been taken.

The boards of these individual companies are still to approve of the new initiative, it is learnt. Sources said that the decision to have a single entity was made necessary on three counts. One, a single, common brand can be used for all consumer infocom services. Two, billing systems and software, traditionally the most complex bits, can be integrated and unified across services. Third, sources said that having all the operational businesses under one roof would help the group when it comes to listing the firm on the bourses.

The decision to float a new company was also necessitated by the fact that the Tata group was keen that it did not want a multi-layered structure and wanted its operational companies to go public. If the merger of Hughes Tele.com and Tata Teleservices proceeds, the joint entity, with the permission of shareholders, may also be swept into the new flagship.

The back end of the group’s telecom business, infrastructure, is being handled by the Tata Power Broadband division which has a 400-kilometre optic network lit and ready, the running of which will become operable from September-end and stretch from Mhape to Mumbai to Mulshi beyond Pune. Similarly, Tata Consultany Services, which has a telecom software business worth Rs.700 crore and employees 3,000 engineers in this business, is also using its competencies in this area to design operational networks and billing systems for the group companies.