Idea Cellular Ltd., the fastest growing of India's five biggest mobile-phone carriers, offered 32.4 billion rupees ($757 million) for control of Spice Communications Ltd. to increase subscribers by a sixth.
Idea, controlled by Indian billionaire Kumar Mangalam Birla, agreed to buy a 41 percent stake from MCorpGlobal Communications Pvt. for 77.30 rupees a share and will make an open offer for a further 20 percent at the same price, 41 percent more than Spice's closing price yesterday.
Idea would add about 4.5 million customers, closing in on Bharat Sanchar Nigam Ltd., India's fourth-largest carrier. India is projected by the telecom ministry to double its number of mobile-phone subscribers to 500 million in two years, after surpassing the U.S. as the biggest market next to China in April.
“For sure it's a good thing for Idea,'' said Harit Shah, an analyst at Angel Broking Ltd. in Mumbai. “This will fast-track their expansion plans,'' said Shah, who rates Idea at “buy''.
Idea this year has been adding customers faster than larger rivals Bharti Airtel and Vodafone Group Plc's Indian unit, according to data from the Telecom Regulatory Authority of India. The combined entity will have about 30 million subscribers in the market of 269 million users, according to the regulator.
Idea, India's fifth-largest mobile-phone operator, will also offer 49 Idea shares for every 100 Spice shares for the ensuing takeover.
TM International Stake
After a takeover, Idea plans to sell 464.7 million shares of the combined company at 156.96 rupees a share to TM International Bhd., Malaysia's second-largest wireless carrier, the New Delhi- based carrier said. TM owns 39 percent of Spice Communications.
“India is all about scale. The merger will result in scale being achieved, so it's very positive for us,'' Yusof Annuar Yaacob, chief financial officer at TM, said in a phone interview. “A merger where we'll end up having a stake in Idea is better than having 39 percent'' of a smaller company, he said.
TM, which offers wireless services to 40 million customers in 10 Asian markets including Indonesia and Bangladesh, will gain a stake in an operator with licenses to sell services nationwide.
Yusof said TM will invest almost $2 billion to get as much as a 19 percent stake in the merged entity and added he would fund it through debt.
TM shares were suspended in Kuala Lumpur trading today following the announcement of the deal. They closed yesterday at 7 ringgit.
Source: Bloomberg