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Tata, Hughes in pact to merge fixed-line telephone operations

The Tata group, one of India's largest business conglomerates, said on Wednesday it had signed an agreement with the US-based parent of Hughes Tele.com to combine their fixed-line telephone businesses.

"The MoU is subject to approval of the respective boards of directors, shareholders, relevant corporate bodies and necessary statutory and regulatory approvals," the Tata group said in a statement.

The deal, if it goes through, will be the first consolidation in the country's fixed-line phone industry which has few private players unlike the cellular business.

India's cellular business has seen a spate of mergers and acquisitions in the past few months, the largest one being the merger between Birla-Tata-AT&T with BPL Communications to form the country's largest mobile phone company.

Private groups operating fixed-line services include telecoms group Bharti Enterprises, the Reliance Group, Himachal Futuristic Communications Ltd and Shyam Telecom besides the Tatas and Hughes.

Two state-run companies -- telecom behemoth Bharat Sanchar Nigam Ltd and Mahanagar Telephone Nigam Ltd -- dominate the fixed-line business.

Earlier this week, the Tata group said it was in talks with US-based Hughes Network Systems, a unit of Hughes Electronic Corp and a principal shareholder in Hughes Tele.com for a possible tie-up.

Hughes Tele.com, whose shareholders also include Alltel Corp and India's Group, runs fixed-line phone service in Maharashtra, including its financial hub, Bombay.

The Tata group operates a fixed-line phone network in Andhra Pradesh through unlisted group firm Tata Teleservices Ltd.

The group has won preliminary government approval to start fixed-line services in 15 telecom zones under a new policy announced in January this year which allowed unlimited competition in the business.

"A merger between the two could spare Tatas building a network in Maharashtra and Bombay where Hughes has already built up a solid infrastructure," said an analyst with a European brokerage who declined to be identified.

"For Hughes, which may not have the funds to expand its business to other areas, this deal will give it access to a national footprint which the Tatas are planning," he said.

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