The Hindu Business Line : Sterling Infotech buys RPG Cellular

THE Sterling Infotech group of Mr C. Sivasankaran today announced that it had bought out the RPG group's 79.24 per cent stake in RPG Cellular Services Ltd. The deal is expected to be worth about Rs 210 crore, although both the groups declined to divulge the size of the deal.

The agreement was signed in Chennai by Mr V. Srinivasan, a Director of Aircel Ltd, the cellular company of the Sterling group, and Mr Mahesh Gupta, Group Finance Director of the RPG group.

Sterling Infotech has reconstituted the board of RPG Cellular with a three-member board of directors, which will be expanded at a later date. Mr K.V.P. Baskaran, Chief Operating Officer of Aircel Ltd, will also be in-charge of RPG Cellular Services.

The Sterling group had a few months ago bought the 20.76 per cent held by Vodafone plc in RPG Cellular Service through an offshore deal estimated to be worth $8 million.

According to reliable sources, the Sterling group has paid a total of Rs 250 crore for a 100 per cent holding in RPG Cellular. Industry watchers say that the deal makes sense for the Sterling group, which operates cellular services in the Tamil Nadu circle, excluding the Chennai circle, through Aircel Ltd. They point out that RPG Cellular is among the more profitable cellular companies in the country with a large base of high value corporate customers. Its average revenue per user is close to Rs 1,000, which is considered to be good especially since tariffs have been falling across the board.

RPG Cellular Services, which operates in the Chennai circle, was one of the two original licensees in the Chennai circle. The other licensee, Skycell, was taken over by the Bharti group and renamed AirTel. RPG started its services in October 1995 and had 2,12,823 subscribers in November 2003.

According to a release announcing the transaction today, under the sale agreement all of RPG Cellular's assets, customers and employees will get transferred to the Sterling group.

The release quoted Mr Sanjiv Goenka, Vice-Chairman, RPG Enterprises, as saying that the divestment decision is in line with the group's efforts to consolidate and focus on its core sectors - power and transmission, tyres and its raw materials, and retail.

Mr C. Sivasankaran, Chairman of the Sterling group, was quoted as saying that this acquisition will make Sterling the leading mobile services provider in Tamil Nadu and Pondicherry. "We believe that this acquisition will provide us an opportunity to establish our leadership position in the Chennai metro area."

The release said that KPMG Corporate Finance advised the RPG group on the sale.

The Sterling group is expected to rename RPG Cellular as Aircel so that it has a common brand name across the Chennai and Tamil Nadu circles. It has about three months to change the name of the company.

The Sterling group is also expected to integrate tariffs across the two circles, much like what the Bharti group did when it announced local calling rates across the Tamil Nadu and Chennai circles through a "One State, one rate" scheme in July last.

Industry watchers expect the Sterling group to aggressively promote both the new brand and the tariffs in a bid to gain leadership position. Figures published by the Cellular Operators Association of India show that Aircel, which started services in April 1999, is the leading cellular operator in Tamil Nadu circle with 4,75,705 subscribers in November 2003.

AirTel has a total subscriber base of 4,15,286 across the two circles - 2,79,888 in the Chennai circle and 1,35,398 in the Tamil Nadu circle. AirTel launched its services in the Tamil Nadu circle about 15 months ago.

The players and their profile

RPG Cellular Services Ltd, promoted by the RPG group, commenced commercial operations in October 1995.

It was one of the original cellular licensees for the Chennai circle. The other licensee was Skycell, which was taken over by the Bharti group and renamed AirTel.

RPG Cellular, with a subscriber base of 2,12,823 in November 2003, is the second biggest operator in the Chennai circle, after AirTel.

RPG Cellular was promoted by the RPG group along with AirTouch Communications Inc, USA, and Vodafone group plc, UK. Ericsson is the infrastructure vendor for RPG. Its pre-paid scheme is branded Wings Pre-paid. Over the last few years, the RPG group has built its brand in Chennai around the cellular service, associating the cellular company as being a part of the city. Aircel Ltd is part of the Sterling Infotech group and operates cellular services in the Tamil Nadu circle, which does not include Chennai. It launched operations in April 1999 and has a subscriber base of 4,75,705 at the end of November 2003. Ericsson provides the mobile switching centres and base stations, and Fujitsu the microwave backbone.

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