Idea gets ‘Spicier’ with Telecom Malaysia injection

In the three-step arrangement, Telecom Malaysia International (TMI) which had earlier said that it would make a strategic investment in Idea, has agreed to buy 14.99 per cent stake in the Birla company for Rs 7,300 crore. TMI will get the preferential allotment for Rs 156.96 per share. After the preferential allotment, TMI and Idea will make an open offer with Idea to buy 20 per cent stake in Spice. The open offer will be made at the same price, Rs 77.30 per share, that Idea paid to buy into Spice. Idea will use the TMI money to pay up the Spice group stake, leaving the company (Idea) richer by around Rs 4,600 crore.

After the deal, TMI will hold 18-20 per cent stake in Idea whereas Aditya Birla Group’s stake would fall to 47-48 per cent. “The deal will be settled in six months and Idea will make its presence felt in Punjab and Karnataka where Spice has 44 lakh subscribers. We will also get two 900 MHz GSM spectrum bands which will increase our operational synergies on account of lower operating and capital expenditure,” said Aditya Birla Group chairman Kumar Mangalam Birla. “The buyout of 40.8 per cent stake in Spice Communications Ltd will better Idea’s position in market and make it the fifth largest operator in the country,” said Idea Cellular managing director Sanjeev Aga. The alliance with TMI has been a good one for Idea as it will be left with a cash surplus of Rs 4,600 crore after paying Spice Group. “Idea will benefit from TMI’s investment as we will together develop business co-operation to leverage TMI’s strong presence in 10 principal Asian markets, including Sri Lanka and Bangladesh,” said Aga .

Idea is currently rolling out operations in Mumbai, Bihar, Orissa and Tamilnadu. It plans to provide services in Kolkata, West Bengal, Assam, North East and J&K. “The investment by TMI will support Idea’s aggressive growth plans,” Aga added. Idea currently operates in Andhra Pradesh, Delhi, Gujarat, Haryana, Himachal Pradesh, Madhya Pradesh, Chhattisgarh, Maharashtra, Goa, Rajasthan and UP.

“The alliance with TMI has significant value for our shareholders as we will be able to provide roaming and long-distance calls for cheaper rates,” said Aga. On the question that Spice has been continuously incurring losses, Aga said that in the long term the deal would prove profitable. After the deal Spice plans to shift focus to high growth mobile value-added services sector.

“This divestment will enable Spice to redeploy resources and strengthen the Group’s mobile ecosystem businesses led by mobile VAS, mobile devices, telecom retail and customer support. This transaction makes Spice an operator-agnostic services provider, where we will continue to provide services to the Indian mobile telephony market,” Spice Group global chairman B K Modi said.

47-48% Aditya Birla Group’s stake in Idea after the deal

49:100 Spice-Idea merger ratio (49 Idea shares for 100 Spice shares)

20% Open offer Idea and TMI will make for Spice shareholders at Rs 77.30 per share

14.99% The stake Telecom Malaysia will get in Idea for Rs 7,300 crore at Rs 156.96 per share

Spice territory Two circles of Punjab and Karnataka with a subscriber base of 4.4 million

Idea territory 11 circles with a subscriber base of over 26 million

Rs 4,600 cr Cash surplus with Idea due to deal with Telecom Malaysia after paying Spice Group

The deal will be settled in 6 months and Idea will make its presence felt in Punjab and Karnataka. We will also get two 900 MHz GSM spectrum bands which will increase our operational synergies on account of lower operating and capital expenditure.”

Kumar Mangalam Birla, Chairman, Aditya Birla Group