Spice Telecom, Idea Cellular Deal Almost Certain
This could be the beginning of the last round of consolidation in the Indian telecom industry. If media reports are to be believed, Indian mobile operator Spice Telecom is in advanced talks with Idea Cellular for a sell-out. Spice is a small cellular operator with 2.8 million subscribers in two circles - Punjab and Karnataka. On the other hand, Spice is also planning an IPO this year. B K Modi group (B K Modi pictured right) owns 51 per cent stake in Spice, while the 41 per cent is held by Telekom Malaysia.
According to Business Standard, Spice and Idea Cellular may be go in for an all-stock deal. Spice may get a 12 per cent equity in Idea Cellular post-merger, the report further said. Idea has a market capitalisation of Rs 32,000 crore on Wednesday’s closing price. The Economic Times had reported about the possibility of a merger between Spice and Idea Cellular a couple of days ago. It also speculated Telekom Malaysia increasing its stake in Spice, and then go in for a buyout of Idea Cellular.
Hindustan Times also reports that Spice is delaying its IPO - which is expected to open in June - since it prefers to close the deal with Idea before going public. That will less complicate the deal since the buyer does not have to go through a post=deal open offer. Spice has also reportedly suspended its plans for pre-IPO placement of arounf 40 million shares. The company had even agreed to sell the shares at Rs 40-42 (which values Spoce at Rs 2,750 crore). But when the company sells out fully, it will get a higher valuation because of the control premium. Spice has recorded a loss of Rs 67 crore on a turnover of Rs 680 crore in the financial year ended June 30, 2006.
HT also reports that PricewaterhouseCoopers is doing due diligence for Idea. Merrill Lynch is the investment banker and Amarchand Mangaldas is the legal advisor for Idea.
Shyam Tele Link Ltd is another small operator which holds a Unified Service Access License (CDMA plus basic licence) for the Rajasthan circle. The company operates fixed line, mobile (CDMA) and broadband services in this circle. It claims to have 200,000 subscribers for its brand Rainbow. Shyam could be another company up for grabs in the future. Shyam had sold its GSM business (Hexacom) to Bharti Airtel a few years ago.
