Idea Cellular May Get Spice-d Up

[@ksh@T 20]

New Delhi: According to reports Idea Cellular is all set to merge with Spice Telecom.

Spice Tele has been valued between Rs 4,500 crore and Rs 5,000 crore. The Spice shareholders will hold 12 per cent stake of the merged entity.

Spice Telecom, the brand name of Spice Communications Limited is presently operating Cellular Phone Services in the states of Punjab and Karnataka with a subscriber base of 2.8 million subscribers.

It was to float an IPO in the June-July this year

Considered as one of the best service providers of mobile telephony in India, Spice Telecom has been promoted by Modi Wellvest Private Limited.

Chairman of Spice Tele B K Modi, said that at this point they were not in merger talks, but confirmed that there was a proposal for a merger with Idea.

Currently, they were concentrating on their IPO, after which merger talks might resume.

Telekom Malaysia Berhad has 49 per cent stake in Spice Communications Limited (Spice), a wholly-owned subsidiary of TM's international investment holding company, TM International Sdn Bhd (TMI). The remaining 51 per cent is with Modi Wellvest Private Limited.

Sourcr IBN:

Edited June 6, 2008 by @ksh@T

[@ksh@T 20]

Idea Cellular, Spice redial merger

NEW DELHI: Idea Cellular and Spice Communications are again talking merger. ET has learnt that two options are being considered. The first, the Modis may sell their 40% stake in the company to Idea before the merger.

Telekom Malaysia , which has a 39% stake in Spice, will then get a stake in Idea post-merger. The second, Telekom Malaysia will first buy the Modis' stake in Spice and the company will merge with Idea later. In such a scenario, too, TM will end up being a shareholder in Idea.

Spice Communications chairman BK Modi today confirmed ET's report last week which said he was looking at a stake sale. He did not mention Idea’s name but said that Etisalat of UAE and Japan’s NTT DoCoMo could be interested parties, and added that he was open to Telekom Malaysia increasing its stake to 74% in the company.

“TM partners Etisalat and NTT DoCoMo in some markets. If they want to bring them in as part of the deal (for taking stake to 74%), we are open to that,” Mr Modi said.

However, a senior source told ET that Idea Cellular may be closest to the deal. Idea Cellular MD Sanjeev Aga could not be contacted despite repeated attempts. But another Idea executive confirmed, on condition of anonymity, that talks have taken place between the two companies. “It has been happening on and off; talks are being held at the promoter level. There has been no final decision on the issue yet,” the source added.

In June last year, merger talks between the two companies broke down over valuation differences. According to a source, Idea had put the enterprise value of Spice at $700 million and was willing to go up to $1 billion but Spice wanted the value to be upped to $1.3 billion.

The AV Birla group-controlled Idea may be keen on Spice now largely due to the latter’s presence in the Punjab and Karnataka circles where it’s not present. While Idea has been allotted spectrum to roll out operations in these two circles, a full-fledged roll-out will take more than six months. On the other hand, a merger will give Idea a strong foothold in the two circles, which also boasts of high average revenue per user.

The merged entity will become the fifth largest telecom company in terms of mobile subscribers (28.5 million-plus) after Bharti, RCom, Vodafone and BSNL and move ahead of Tata Teleservices, which have 25 million subscribers. Idea has been allotted spectrum in the 11 circles where it does not operate, and is readying plans to roll out mobile services in them. It is set to become a pan-India operator by 2009.

The reason why the Modis may want to exit Spice is due to its inability to become a pan-India player, which is crucial for profitability in the world’s most competitive telecom market. DoT had recently rejected Spice’s application for a pan-India licence citing the company’s poor net worth, and instead awarded its licences for just four more circles — Andhra Pradesh, Haryana, Delhi and Maharashtra.

However, even in these, Spice’s expansion plans are yet to be finalised since TM has refused to pump in the requisite resources. The Malaysian telco is known to share a frosty relationship with the Modis, sources added.

Spice has just under 4.5 million of India’s over 269 million mobile users — a market share of a mere 1.6% — and is 39.2% owned by Malaysia’s state-controlled Telekom Malaysia . The BK Modi family has a 40.8% stake through Modi Wellvest, while the remaining 20% is held by the public and financial institutions. The company posted a loss of Rs 36.50 crore for the quarter ended March 2008 and a loss of Rs 14.66 crore in the corresponding period last year.

[@ksh@T 20]

Modi exits Spice Communications completely: Reports

DELHI: BK Modi struck a deal with Idea by selling 40.8% of his stake in Spice Communications, according to TV reports.

According to the reports the deal is valued at Rs 72 per share. Under this deal Telekom Malaysia would get proportional stake in Idea, reports said.

Modi family owns around 40% stake in Spice Communication while Telekom Malaysia has 39.2% stake.

[Honest 836]

Idea Cellular buys Modi's stake in Spice

7 Jun, 2008, 1242 hrs IST, TNN

MUMBAI: AV Birla group telecom company Idea Cellular is buying out the Modi group’s stake in Spice Communications, taking complete control of the cellular firm.

After it buys the Modi stake, Idea will make a mandatory open offer for 20% of Spice. ET had reported on the impending deal in edition on June 4.

The Modis, currently Spice promoters, are likely to sell their entire stake and exit the company. Subsequently, the two companies will be merged. Telekom Malaysia, which owns less than 40% of Spice, will hold a stake in the combined entity.

Spice shares closed at Rs 51.95 on Friday, down 3% from its previous close. The benchmark index Sensex, meanwhile, fell 197.5 points or 1.25%. At this price, its market capitalisation is around $850 million. The value of the deal could not be ascertained.

Telekom Malaysia was also interested in increasing its stake in the company. It wanted to buy out the Modis and then explore the option of merging with Idea at a later stage.

The Idea board met in Mumbai on Friday. However, the details of the meeting could not be ascertained. Idea’s managing director Sanjeev Aga and BK Modi of Spice refused to comment.

For quite some time now, Spice, which operates in Punjab and Karnataka circles, has been an acquisition target for various reasons. One, it has remained restricted to the two circles 11 years after rolling out operations. Two, it has spectrum in the 900 MHz band, which can accommodate a larger number of subscribers than the 1800 MHz band used by other GSM operators. Spice has nearly 4.4 million subscribers in the two circles.

Idea Cellular is a leading cellular service provider of the AV Birla group. TM is an emerging leader in the Asian communications market with presence in Indonesia, Singapore, Cambodia, Thailand, Bangladesh, Pakistan, India, Sri Lanka and Iran besides Malaysia.

TM’s investment philosophy is to play an active role in its international operations, with an emphasis on management control, which it has been seeking in Spice for almost a year now. Together with mobile operations in Malaysia, TM’s regional mobile customer base (across nine countries) was 39.8 million at 2007-end.

[@ksh@T 20]

well finally after a year of negotiations and na -nukar finalyy !dea is spiced up

[Greatest 55]

this might be good news for idea, and the consumers of the two circles, punjab and karnataka... good goin....

[@ksh@T 20]

Spice call: Modi, Telekom Malaysia dial investors

MUMBAI: A tug of war may have started for the management control of Spice Communications. The Modis, who hold a 40.8% stake in the two-circle GSM operator, are learnt to have roped in Bahrain Telecom (Batelco) to buy out Telekom Malaysia from the joint venture.

TM, on the other hand, is in talks with Idea Cellular to buy out the Modis’ stake and subsequently merge the two companies, sources close to the developments told ET.

As reported by ET on May 5, there have been some differences between the joint venture partners over the management control and ways to finance the loss-making company’s expansion plans. That time, both the parties had strongly denied any rift.

“Over the weekend, Batelco approached TM with an offer to buy out its 39.2% equity in Spice. The offer was made at around Rs 65 to Rs 70 per share,” said a source close to the development. Spice shares closed at Rs 51.95, down 3% from its previous close, on the Bombay Stock Exchange on Friday.

“Batelco is looking at replacing TM in the joint venture and will then make an open offer for increasing its stake in the company. If TM accepts the offer, the BK Modi group will be retained as the Indian partner in Spice,” said the source.

BK Modi and TM International CEO Datuk Yusof Annuar Yaacob declined to comment.

The Spice Communications saga has gone through many twists and turns, which have been chronicled by the media in exact detail. Many alternative plans have been discussed by the two existing partners, TM and the BK Modi group. One of these options was reported in ET for the first time on June 4 and later on June 7.

This involves the AV Birla group’s telecom arm, Idea Cellular, entering Spice as a strategic investor and the exit of BK Modi group. TM is learnt to be in favour of this option. As part of this plan, the Idea stake in Spice would eventually reach 74% through a combination of an open offer and acquisition of shares from the Modis.

The BK Modi family’s 40.8% stake in Spice is held through Modi Wellvest. Public and financial institutions hold the balance 20%. Subsequently, Spice may merge with Idea Cellular and TM will get a stake in the merged entity. “This is an option being discussed between TM and Idea,” said a company source.

TM has repeatedly said it would not exit the Indian market, as it was an important geography for the company. TM’s Indian operations complement its South and South-East Asian investments in Sri Lanka, Bangladesh, Indonesia, Pakistan, Singapore and Thailand.

Having failed to expand beyond the two circles of Punjab and Karnataka in the past one year, Spice is an attractive acquisition target. It also has spectrum in the 900-MHz band, which can accommodate more subscribers than the 1800-Mhz band being used by other GSM operators.

The potential entry of Batelco would further add to the confusion. Batelco was a telecom monopoly in Bahrain until 2003 when a second mobile licence was issued. In 2005, the second fixed-line licence was announced and a third GSM licence is expected by the end of this year.

Bahrain Mumtalakat Holding, the investment arm of the Bahraini government, holds 43.3% in the company besides private Bahraini and Gulf Cooperation Council investors.

With telecom penetration level reaching 150% in Bahrain, pricing pressure is squeezing the net profit margins of Batelco, which last month said that it has a $4-billion war chest for acquisitions in India and Africa. The company has around 3.3 million mobile subscribers and has operations in Bahrain, Jordan, Yemen, Kuwait and Egypt.

[@ksh@T 20]

Idea to buy out Modis' Spice stake for Rs 2,200 cr

NEW DELHI: The Aditya Vikram Birla group-controlled Idea Cellular is set to acquire BK Modi's 40.8% stake in Spice Communications for around Rs 2,200 crore.

A top source confirmed that the two companies have finalised the deal between Rs 77 and Rs 78 per share, a premium of 45% to Monday’s closing share price of Rs 53.20. The deal values Spice Communications at Rs 5,347 crore. The company is likely to make an announcement in the next few days.

After buying out the Modis, Idea Cellular will make the mandatory open offer for 20% stake in Spice that is currently held by the public. The two companies will be subsequently merged, said the source. Telekom Malaysia, which currently has a 39.3% stake in Spice Communications, will get a proportional stake in the combined entity, sources said. ET had reported about a possible merger between Idea and Spice in its edition dated June 4.

Industry analysts and market observers said based on Monday’s closing price of Spice, Idea is offering a “considerable” premium. The Spice shares closed at Rs 53.20 on Monday, up 2.4%. At this price, the Modi group’s stake is valued at Rs 1,497.5 crore, pegging the company’s valuation at Rs 3,670.3 crore.

The deal will give Idea strategic advantage, since Spice holds spectrum in the highly efficient 900 Mhz, which can accommodate a large number of subscribers. If Idea were to launch operations independently in Karnataka and Punjab (the two circles where Spice operates now), it will only get radio frequencies in the 1800 MHz band, as the 900 MHz has been exhausted. While it could not be independently confirmed, it is learnt that a deal was thrashed out by merchant bankers representing the three principal players — Lazard, which is advising Telekom Malaysia, Merrill Lynch on behalf of AV Birla group, and KPMG, which is advising the Modis.

The deal will result in Idea Cellular moving ahead of Tata Teleservices to become the country’s fifth-largest mobile service provider.

The merged entity will have operations in 13 of the 22 telecom circles in the country with a subscriber base of around 28.5 million. At present, Spice has around 4 million subscribers, while Idea has services in 11 circles and over 24 million customers.

The Modis have been looking for a quick exit ever since the telecom tribunal last week rejected the company’s plea for a pan-India licence. Besides, due to the company’s poor fiscal health, the Modis were unable to fund its expansion plans.