Idea Cellular said on Thursday private equity Providence Equity Partners would buy a fifth of its unit Aditya Birla Telecom for $640 million, the latest deal in the world's fastest growing wireless market.
The deal, which values the telecom firm at $3.2 billion, is subject to regulatory approvals, and expected to close by August.
The funds will be used for network rollout and ongoing operations of Aditya Birla Telecom (ABTL), which has a licence in eastern Bihar and Jharkhand states, Idea Cellular said.
Idea will transfer its 16 percent holding in tower company Indus Towers — a joint venture with top telecom operator Bharti Airtel and Vodafone –to ABTL.
“ABTL has got growth opportunities in one of the biggest telecom circle going forward (Bihar service area) and also 16 percent equity in Indus Towers,” Managing Director Sanjeev Aga said, explaining Providence Equity's interest in the firm.
DSP Merrill Lynch was the sole advisor to Idea on the deal.
The Bihar circle has the second highest population among all service areas, but the lowest mobile penetration, Aga said.
ABTL has received spectrum, and is in an “advanced stage of readiness” to roll out mobile services under the Idea brand in the next few months, he said.
ABTL would consider an initial public offer “in the medium-term”, he said.
Providence Equity had also invested $400 million in a pre-IPO placement in Idea Cellular, India's No. 6 wireless telecoms firm, and a part of diversified conglomerate Aditya Birla Group.
Idea operates in 11 circles and has 24 million customers.
Interest in Indian telecom operators is keen: On Wednesday, Bahrain Telecommunications Co BTEL.BH and Qatar Telecommunications QTEL.QA said they were in talks to buy into existing telecom operators and firms that have won licenses.
Bharti Airtel is in exploratory talks with South Africa's MTN group that may result in India's biggest overseas deal.
India has been adding more than 8 million users each month, boosted by call rates as low as 2 U.S. cents and cheap handsets.
Source: Reuters