Essar Teleholdings and Hutchison Telecom have internally valued their to-be-consolidated entity at $1.9 billion. The merger is expected by this month-end.
Vikash Saraf, chief executive officer of the holding company for Essar's telecom and related ventures, said the figure has been discussed and tentatively agreed upon.
Saraf said the valuation was the result of a just-concluded internal exercise. Relative valuation indicated there will be no change of cash and it would be just a merger of different circles.
The tentative stake-holding of the combined entity has also been arrived at. Hutchison is expected to hold 49 per cent, Essar Teleholdings around 34 per cent, Kotak Mahindra 15 per cent and the Hindujas a small stake. Saraf said a final picture will emerge by the end of this month.
Industry sources said the sector expected the consolidation to be precursor to an initial public offer.
The consolidation was necessary since Essar Teleholdings has no stake in the Kolkata and Gujarat circles. Aircell Digilink is the only cellular circle in Essar's portfolio in which Hutchison had no stake.
Haryana, east Uttar Pradesh and Rajasthan were run independently by Aircell Digilink, in which Essar holds a majority.
Essar Teleholdings along with the Hong Kong-based Hutchison Whampoa covers four metros and six states. Hutchison and affiliates accounted for a subscriber base of over 2 million. The combined entity will, hence, have over 2 million subscribers.
The move to consolidate stemmed from the complex and different holding structure across the many circles. Hutchison Essar Telecom, a joint venture between Essar and Hutchison, is one of the four licensees offering cellular services in Delhi and the satellite towns of Ghaziabad, Noida, Faridabad and Gurgaon.
Under a joint venture management contract, Essar holds 49 per cent of the company's equity, while Hutchison Whampoa is responsible for the operational management.
Hutchison Essar South Ltd began operations in 2002 as a fourth cellular operator in Andhra Pradesh, Karnataka and Chennai.