It’s consolidation time in India’s booming telecom industry. Idea Cellular, the fifth largest mobile operator in terms of subscriber base, is acquiring 40.8 per cent stake in its smaller rival Spice Communications for Rs 2,716 crore.
The deal will help Malaysian telecom major TM International (TMI) to convert its 32 per cent stake in Spice Communications to Idea shares. In other words, TMI will hold 18-20 per cent stake in Idea after the Aditya Birla group firm merges Spice with itself.
“This is a strong inflection point for Idea,” Kumar Mangalam Birla, group chairman, Aditya Birla group said. “It would give us a lot more firepower to grow in India.”
The Birlas have chalked out a three-way plan for the merger. They will initially pay Rs 2,716 crore to BK Modi for 40.8 per cent stake in Spice Telecom in a cash deal at Rs 77.30 per share. This will include Rs 544 crore as non-compete fees to the Modis.
Then they will make an open offer for 20 per cent of remaining shares at the same price. Idea will make a preferential allotment of 15 per cent of its equity to TMI, resulting in a cash inflow of Rs 7,200 crore. Idea and Spice will then merge through a share swap, where Spice shareholders would get 49 Idea shares for every 100 Spice shares they hold.
{{/usCountry}}Then they will make an open offer for 20 per cent of remaining shares at the same price. Idea will make a preferential allotment of 15 per cent of its equity to TMI, resulting in a cash inflow of Rs 7,200 crore. Idea and Spice will then merge through a share swap, where Spice shareholders would get 49 Idea shares for every 100 Spice shares they hold.
{{/usCountry}}The Spice brand will be phased out in six months. In the merged entity, the Birlas will own 46-48 per cent and Telekom Malaysia will own 18-20 per cent. “All the three parties amicably settled differences over the holding pattern," said S
Subramaniam, head, investment banking at Mumbai-based Enam Securities, which advised Spice for the merger.
The deal would give Idea entry into Punjab and Karnataka, two of the country’s fastest growing markets for mobile phones. The two states account for close to 11 per cent of India’s total wireless subscribers.