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.
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