Essar pulls out of BPL deal, DoT denies hand

Even as Essar-owned BPL Mobile today called off its proposed sale to Hutchison Essar, recent developments indicate the matter could be far from over.

Hutchison Essar had on Monday made a written offer to Essar and allied parties (BPL Mobile, BPL Communications, and Global Capital) calling upon them to conclude the sale of the 1.3-million-subscriber-strong BPL Mobile's Mumbai operation within the validity period, which ended on July 31.

With the offer not succeeding, sources close to the development said there was a possibility that the issue could escalate into a legal battle. "We have not got there as yet," the sources said, and pointed out that Hutch might not agree to the deal being called off.

On its part, the Essar group blamed the collapse of the deal on the failure to get requisite government approvals on time.

However, when contacted, senior telecom officials said the government had not blocked or delayed matters. "The merger has nothing to do with us. We do not give permission for mergers; it is only some changes required to the licences that have legal implications that need our role. We will not take a view on any merger, and the DoT has nothing to do with the consequences," the officials said.

"If a scheme of merger, approved by the relevant high court, had been provided to us, we would have taken that on record and noted it," they added.

Company sources added that a "no objection certificate" was all that was remaining, as Hutchison Essar had answered all DoT queries regarding the deal. Once the NoC came in, the joint venture would have moved an FIPB application, seeking appropriate clearances.

While a lot of details were not available, a hint of why the deal fell through despite Hutchison Essar's offer emerged from company sources.

"The proposed merger of these two businesses would require the combined entity to surrender up to 15 Mhz of scarce spectrum. This would affect the future growth of the merged entity in which Essar owned a sizeable stake. Now, the termination of the deal provides Essar an opportunity to run BPL Mobile on its own. Later, Essar may reap good returns by selling off the company," they pointed out.