VCCircle

Idea Cellular has come a long way since its avtar as Birla Communications in 1995. From a single promoter-owned company, the Aditya Birla group's telecom venture has grown to become a prominent player in the telecom sector through innovative joint ventures and acquisitions. The
low point of AV Birla's journey in telecom came last year when the group had a spat with the Tatas who were then pushing for the launch of CDMA-based telecom services.
In 1995 Idea Cellular, promoted by the AV Birla Group, obtained licences for providing GSM-based telecom services in the Gujarat and Maharashtra Circles. Next year it changed its name to Birla AT&T Communications following a joint venture pact between the group firm Grasim and US-based telecom
giant AT&T Corporation. Operations started in 1997. The next three years witnessed the evolution of the telecom policy in the country with advances in wireless technology. The market started picking
up in 2000 and the firm merged with Tata Cellular which brought on board Tatas and also acquired
a licence for the Andhra Pradesh circle.

Acquisitions Unfold
The inorganic growth strategy continued in the following year when the firm acquired RPG Cellular which also brought along the operators licence for the Madhya Pradesh (including Chattisgarh) circle. Around this time the firm's name also changed to Birla Tata AT&T or Batata, as it was more popularly known as. As Batata it also obtained the licence for providing GSM-based services in the lucrative Delhi
circle.
The Idea Cellular as we know today took birth in 2002 which also led to the umbrella consumer branding of 'Idea'. This year the firm crossed the milestone of a million subscriber in the country.
However, it got a true national presence with the acquisition of Escotel in 2004 which gave it presence in Maharashtra (excluding Mumbai), Goa, Gujarat, Andhra Pradesh, Madhya Pradesh, Chattisgarh, Uttar Pradesh (East and West), Haryana, Kerala, Rajasthan and Delhi NCR. It also completed a major debt restructuring exercise and got additional funding for expansion in the Delhi circle.

AT&T Exits
This year was also significant for another reason as it saw the exit of AT&T from the JV, where the three partners AV Birla, Tatas and AT&T held around 33 percent stake each. After AT&T merged with
Cingular in the U.S. in 2004, it decided to sell its 32.9 percent stake in Idea.
Initially there were many suitors for this stake including Telekom Malaysia, which now gets an entry into Idea after the Spice Communication deal, and Maxis (which has invested in another telco Aircel). Eventually AT&T's stake was bought over by the other existing promoters: the Tatas and Birlas at 16.45 percent each, becoming equal partners in Idea. They paid Rs 1,300 crore for the 32.9 per cent stake which valued the firm at around Rs 4,000 crore. Telekom Malaysia is now forking out
more than Rs 7,000 crore for a 15 percent stake through a preferential allotment, which values Idea at around $10 billion translating into the value appreciation of 10 times in less than four years.

The Tata-Birla Row
After the buyout of AT&T share, the Birla-Tata partnership began to see problems as Tatas entered the telecom business separately through their own subsidiary, Tata Indicom, which was a CDMA-based
service provider. Given this move the licence for Mumbai circle for Idea was delayed and led to further difference of opinion between two of the most prominent business groups in the country. As per the sector licence norms, one promoter could not have more than 10 percent stake in two companies operating in the same circle. Since Tata Indicom was already operating in Mumbai, the norms did not allow Idea to get a licence.
After months of an acrimonious dispute with Tatas who had interest in two competing firms, the partners came to an agreement. The Tatas sold out their 48.18 percent to Birlas in 2006 at Rs 40.51 a share which translated into a deal worth Rs 4,406 crore, valuing the firm at around Rs 9,000 crore.
In the meantime the firm turned profitable in 2005, which explained a sharp premium for the equity stake given that the firm's valuation doubled in just one year since the time AT&T sold its stake.
While 15 percent of the 48.18 percent was acquired by Aditya Birla Nuvo, a company which housed the new business initiatives of the Birlas, other group firms held the remaining stake.

Life After Tatas
In 2006, Idea also acquired Escorts Telecommunications, reached the milestone of 10 million subscribers, received the licence for Mumbai circle and indirectly received a licence for the Bihar circle
through the merger of Aditya Birla Telecom with Idea. Aditya Birla Nuvo which owned Aditya Birla Telecom apart from being one of the key shareholders of Idea, transferred its entire shareholding in the firm to Idea for Rs 10 crore.
The clarity over promoter ownership -following exit of Tatas - and with a pan India presence, Idea went public with an IPO raising Rs 2,818.7 crore. Today Idea Cellular has close to 26 million subscribers and closed last financial year with net sales of Rs 6,720 crore ($1.6 billion)
and net profit of Rs 1,042.3 crore ($240 million). Though Idea has fallen behind other key players in the industry like Bharti Airtel, Vodafone Essar and Reliance Communications, who entered the sector
either at the same time or much later, Idea's business has grown in size and the company's market cap now stands at about Rs 26,887 crore or $6.4 billion.