How This Mega Tele Deal'll Affect You

[Greens 21]

How this mega tele deal'll affect you

MANOJ GAIROLA

TIMES NEWS NETWORK[ THURSDAY, APRIL 01, 2004 12:16:28 AM ]

NEW DELHI: The stage is being set for the biggest deal in the Indian telecom sector . NRI businessman C Sivasankaran is believed to be close to selling his telecom holding company Aircel Televentures, which owns 100 per cent in Aircel and Aircel Cellular.

Aircel is the largest cellular service provider in the Tamil Nadu circle which excludes Chennai, while Aircel Cellular is the second largest service operator in Chennai.

Bharti and Idea are believed to be in the race for buying the companies at a valuation close to Rs 1,700 crore. The deal is likely to be closed by the end of the month.

Both the companies are operating at EBITDA level of 45 per cent. Sources said, the companies are being valued at eight times EBIDTA level, which is in the range of Rs 1,700 crore to Rs 2,000 crore.

When contacted, Aircel officials refused to comment on the developments. Sources involved in the deal, however, said the deal is expected to be complete by the end of April. Bharti officials also declined to comment.

In Tamil Nadu, Aircel is the largest cellular service provider with a subscriber base of 5,90,848. BSNL, the second largest cellular service provider had a subscriber base of 3,35,000 at the end of February, 2004.

In Chennai, Aircel Cellular is the second largest cellular service provider. It had a subscriber base of 254,993, while the largest cellular service operator Bharti had a subscriber base of 361,151 at the end of February, 2004.

Aircel commenced operations in 1999; Sivasankaran acquired the Chennai circle from Vodafone and the RPG Group.

The deal was completed in December 2003. Since then the Chennai licence has been held in Aircel Cellular, a 100 per cent company owned by Aircel Televentures.

The two companies are expected to make a combined EBIDTA of Rs 195 crore during this fiscal. It is expected to grow to Rs 275 crore during next fiscal.

The combined debt in the company is around Rs 350 crore. Sources involved in the deal said the valuation at eight times EBIDTA is quite attractive compared to that of the current trading multiples of 20 times EBIDTA for Bharti.

When the deal is complete, it would be the largest deal in the telecom sector. Earlier, the largest deal was that of Idea acquiring Escotel at an enterprise value of about Rs 1,350 crore.

In terms of equity value, the deal was quite small as Escotel has huge debt. In the case of Aircel, equity valuation would be in the range of Rs 1,000 crore.

Sivasankaran’s Sterling group is a cash rich group. Recently, it sold its broadband and internet business of Dishnet to Tata-owned VSNL for Rs 270 crore and Tamil Mercantile Bank to the Nadar community for about Rs 300 crore. It has investments in real estate worth more than Rs 200 crore. Sivasankaran may even sell his stake on a part debt instrument.

Aircel was the first company in the country to bring down cellular prices at par with that of basic services. Its tariff of 40 paise per minute anywhere in Tamil Nadu about four years ago initiated a price war in the country.

It was also first to make incoming calls on cellular network free. In its network incoming calls are free for last four years.

Airtel of Bharti is an operator both in Tamil Nadu and Chennai, while Idea does not provide services in either of the circles.