Reviving BPL remains a big challenge for Essar: CNBC-TV18

Essar is not in a hurry to sell BPL, reports CNBC-TV18. Its bigger challenge is to revive the BPL business. For almost 10 months now, BPL's growth has been languishing, with little focus or investment in the brand or infrastructure, as it was on the verge of being merged with Hutch Essar.

Industry sources estimate reviving the BPL Mumbai could cost Essar up to Rs250 crore. The good news is that BPL has maintained the approximately 13-lakh subscribers it had when the business was sold. The bad news is that in the interim the rest of the industry has grown at over 50 per cent.

As a result, BPL that used to be the second largest brand in Mumbai now lags behind Airtel. Experts say a minimum Rs4-5 crore will have to be spent every month on marketing and distribution to revive the brand and subscriber growth. Essar intends to continue using the BPL brand, which it has rights for up to March next year and can renew those rights thereafter.

A bigger investment is needed in infrastructure. Currently BPL has about 600 cell sites across the city. If Essar wants to match the industry growth rate in subscribers, it may need to put in at least another 400 additional sites. Sources also indicate that other infrastructure, such as switches and billing systems need to be upgraded.

While dressing up BPL may be a challenge for Essar, selling it may not. There are enough buyers interested in the Mumbai circle, the second largest in the country. But at what price will Essar want to trade it?

Hutchison Essar was to pay approximately Rs1,700 crore to Essar for the business. That puts the valuation at Rs13,000 per subscriber. Any other buyer would probably have to top this. So far, the industry benchmark is Rs20,000 per subscriber valuation that Vodafone gave Bharti.

Sources indicate the buyers are already lining up including Idea, Maxis, Telecom Malaysia and Etisalat.