NEWS CLIPPING ON IDEA PLANS ACQUISITION

Idea close to snapping up Spice Telecom
New Delhi May 31, 2007
Deal expected to value telecom operator at $1 bn.

Idea Cellular, the fifth largest mobile operator in the country with around 15 million subscribers, is believed to be on the verge of clinching a cash-cum-equity buyout of Spice Telecom that values the latter at around $1 billion.

Spice Telecom has 2.8 million subscribers in Punjab and Karnataka.

The deal is expected to be a largely stock-based one, in which the listed Idea Cellular, owned by the Aditya Birla Group, would issue stock to Spice promoters led by industrialist B K Modi.

Modi owns 51 per cent of Spice, with Telecom Malaysia holding the remaining 49 per cent. The equity component is estimated to be around 12 per cent of Idea's equity. Spice Telecom has already received Sebi's approval for a proposed IPO.

At close of trade today, Idea, which is listed on the BSE, had a market cap of just under Rs 32,000 crore. The scrip closed at Rs 122.90 on the BSE.

Attempts to contact Modi, his son Dilip Modi, a director in Spice, Idea Cellular Managing Director Sanjeev Aga, among other executives of the two companies, did not succeed. An Idea spokesperson declined comment.

According to sources, the deal is structured almost the same as the one in which Shyam Telecom's Rajasthan GSM operation (Hexacom) was acquired by Bharti some years ago.

In that deal, the Shyam promoters were issued equity in the listed Bharti Tele-Ventures (now known as Bharti Airtel), with the downside being protected by the acquirer.

In the past, most telecom acquisitions in the country have involved unlisted companies striking deals. All of Hutchison's Indian acquisitions and Bharti's early deals, before it was listed, were cash transactions that reflected the market value per subscriber and the inherent value of the spectrum involved.

Spice operates on the 900 Mhz band in the two circles, a frequency that supports a higher number of subscribers than the 1,800 Mhz band used by Idea in many of its operations.