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GTL to sell network business to wholly-owned subsidiary
15th October 2005: The board of Mumbai-based network engineering and BPO company GTL has approved a scheme of restructuring, which will result in the sale and transfer of its network infrastructure and related business to a wholly-owned subsidiary called GTL Infrastructure (GIL).

GTL’s main revenue comes from network engineering services, which involve building telecom network for cellular and landline telecom operators. It has built up infrastructure in terms of data centres and a broadband network across the country. The latter part of the business is being demerged and shifted to its subsidiary company.

The parent company will be left with network engineering services and BPO business. GTL’s board has appointed an internal committee to initiate this process. GTL’s shareholders will get shares in GIL after the demerger/sale of the business. GTL has also restructured its BPO operations and has shut down its voice-based business. The voice business was seeing a fall in margins and the company did not want to continue in the low-end BPO business.

GTL is now looking at the option of inducting a strategic or private equity investor into its BPO business, according to company officials.

The company does not see the BPO business as core to the company as it does not align with its network engineering services business in the telecom domain. The scheme for determining the ratio of GIL shares to be allotted in favour of GTL stakeholders will also be determined soon.

Meanwhile, GTL Technology Investments, a wholly owned subsidiary of GTL will be merged back with GTL. This is being done to enable the consolidation of GTL’s investments in international businesses, e-security and infrastructure under GTL.

According to company officials, the restructuring is being done for optimisation of capital employed and to improve the ROCE. Moreover, the infrastructure business is capital-intensive and will require additional resources over the next few years.

GIL will be accessing capital from strategic and private equity players, and as a stand-alone company it will also get tax benefits available to an infrastructure company. Meanwhile, GTL will focus on service business including network engineering and allied services of operations and maintenance.

Tata Consultancy Services Ltd (TCS) to merge Tata Infotech with itself
20th October 2005: TCS on Wednesday said it will amalgamate Tata Infotech with itself. The shareholders and the unsecured creditors of the company have approved the resolution of scheme of amalgamation with Tata Infotech with the requisite majority, the company informed the Bombay Stock Exchange. The scheme of amalgamation is subject to the sanction of Bombay High Court, it said. The company's share price was down 0.25% at Rs 1,435 during the morning trade.

Essar to buy Max Tele's 3.16% in Hutch Essar for Rs 657 cr
19th October 2005: The Rs 20,000-crore Essar group today announced that it has entered into an understanding with Max Telecom Ventures to acquire the latter’s 3.16% stake in Hutchison Essar Telecom for Rs 657 crore, putting the valuation of the telecom firm at close to Rs 21,000 crore.

Priced at Rs 607 per share, the all-cash deal will see the Essar group’s holding in Hutchison Essar, its joint venture with Hutchison Telecommunications International, go up from 30.42% to 33.58%. Essar Teleholdings, an investment firm of the Essar group, will buy the shareholding of Max Telecom Ventures.

“This acquisition is part of our decision to enhance our stake in the consolidated entity and also reflects the strong relationship between Essar and Hutch,” said Vikash Saraf, CEO, Essar Teleholdings.

The consolidation move comes barely a month after the group signed an agreement to sell BPL Mobile Communications and BPL Cellular to Hutchison Essar.

In addition, it also agreed to sell Essar Spacetel, the company that has applied for licences in seven telecom circles, to Hutchison Essar for $6 million (Rs 27 crore) in September.

The group, which has presence in a variety of sectors like steel, shipping, power and oil & gas besides telecom, has been trying to consolidate its stake in the telecom service space.

Hutchison Essar, the second biggest private sector player in the GSM sector, also sees the consolidation move as an indication of an impending IPO.

Holding of Max Telecom Ventures, which has been an investor in Hutchison Essar, came down from 10% to 3.16% after the company had gone through a series of acquisitions and infusions of capital.

Hutchison Essar is in the midst of restructuring including pruning its brands. The company plans to phase out its ‘Orange’ brand in this financial year and consolidate all its operations, including that of the acquired BPL Communications and BPL Mobile, under the Hutch umbrella.

Sources close to the developments said the consolidation of brands would help provide a ‘more effective and customer-centric approach” and offer uniform rates and services across all its 13 circles in the country.

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