Acquisition of spice communication by idea cellular

Indian telecom industry overview

Indian Telecom Sector Fastest Growing Sector – CAGR 22% (2002-07) Second Largest Telecom Market Total mobile services revenue in India is projected to grow at a compound annual growth rate (CAGR) of 12.5 percent during 2009-2013 The telecom subscriber base is expected to cross 770 million connections by 2013, growing at a CAGR of 14.3 percent from 452 million in 2009

Revenues of Indian Telecom Industry: 2002–09 (USD billion)

Top 12 Wireless Operators in the country : Sno Wireless Group Subscriber base in millions Market share (%) 1 Bharti 93.92 23.97 2 Reliance 72.67 18.56 3 Vodafone 68.77 17.55 4 BSNL 52.15 13.31 5 Tata 38.89 9.93 6 IDEA 35.12 8.96 7 Aircel 18.48 4.73 8 MTNl 4.46 1.14 9 Spice 4.13 1.05 10 2.16 0.55 11 HFCL 0.6 0.15 12 Sistema 0.39 0.1  

PROFIL OF IDEA IDEA Cellular is a publicly listed company, having listed on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) in March 2007 IDEA Cellular is a leading GSM mobile services operator in India with over 53 million subscribers, under brand IDEA

A frontrunner in introducing revolutionary tariff plans, IDEA Cellular has the distinction of offering the most customer friendly and competitive Pre Paid offerings, for the first time in India, in an increasingly segmented market. From basic voice & Short Message Service (SMS) services to high-end value added & GPRS services such as Blackberry, Datacard, Mobile TV, Games etc - IDEA is seen as an innovative, customer focused brand.

IDEA offers affordable and world-class mobile services to varied segments of mobile users. Be it high end users, or low-end, price sensitive consumers - IDEA's tariff plans are designed to suit every pocket. IDEA is the winner of ‘The Emerging Company of the Year Award' at The Economic Times Corporate Excellence Awards 2008-09. The company has received several other national and international recognitions for its path-breaking innovations in mobile telephony products & services.

IDEA Cellular is an Aditya Birla Group Company, India's first truly multinational corporation. The group operates in 25 countries, and is anchored by over 1,30,000 employees belonging to 30 nationalities. The Group has been adjudged the ‘6th Top Company for Leaders in Asia Pacific Region' in 2009, in a survey conducted by Hewitt Associates, in partnership with The RBL Group, and Fortune

Service Areas The established service areas are Delhi, Andhra Pradesh, Gujarat, Maharashtra, Haryana, Kerala, Madhya Pradesh and Uttar Pradesh (West). The New Service Areas are Uttar Pradesh (East), Rajasthan, Himachal Pradesh, Bihar, Mumbai, Karnataka, Punjab, Orissa, Chennai & Tamil Nadu, Jammu & Kashmir, Kolkata & West Bengal, and Assam & North East.

Idea launched its services in Mumbai and Bihar in 2008 Idea launched its services in Mumbai and Bihar in 2008. The Mumbai launch was the largest Metro City launch in India. In Bihar, Idea acquired 500,000 subscribers in just over 100 days. Brand Idea was launched in Karnataka and Punjab, through the acquisition of Spice Communications. The company has expanded its pan-India presence through service launches in Orissa, Chennai & Tamil Nadu, Jammu & Kashmir, Kolkata & West Bengal, and the North East states in FY10

PARTNER IDEA welcomes all businesses and individuals interested in partnering with us to enhance and strengthen the IDEA products & services portfolio. To explore such potential partnerships, kindly get in touch with us by submitting the Partners Form. Some of our Technology and Content Partners:

IDEA - Brand Values Innovate . Stimulate . Liberate .... It is these brand values, which have made us a formidable player in the telecom industry. Innovations that stimulate the customer and liberate him from the shackles of time and space are the core of our brand. This is what we strive for. Nothing more, nothing less, nothing else.

Brand Mission The India footprint Idea Anywhere connectivity - bringing India closer. The Technology Advantage Idea Tomorrow's technology to enrich today. The Customer Focus Idea Make a single interaction a lasting relationship. The Employee Focus Idea Nurture the roots that nurture our ideas.

Promoters 1. Aditya Birla Nuvo Limited 2. Grasim Industries Limited 3. Hindalco Industries Limited and 4. Birla TMT Holdings Private Limited.

Spice Introduction Spice Telecom is the brand name of Spice Communications Limited, a mobile phone service provider in India. Spice Telecom is currently operating in the states of Punjab (India) and Karnataka i.e., in 2 circles of 23 Telecom Circles of India. Spice Communications Limited is now a subsidiary of Mumbai based Idea Ceullar Ltd. (an Aditya Birla group company). Idea Cellular owns more than 80% equity in Spice Communiations. Idea Cellular acquired the company from Modi Wellvest and Telekom Malaysia (TMI, now Axiata) in July 2008.

Snapshot: Date of Establishment1995 Revenue312.101 ( USD in Millions ) Market Cap 44638.1475 ( Rs. in Millions ) Corporate AddressA-30,Mohan Co-operative Industrial Estate,Mathura RoadNew Delhi-110044, New Delhi www.spiceindia.com Management DetailsChairperson - Bhupendra Kumar Modi MD - Dilip Modi

Business OperationTelecommunication - Service Provider FinancialsTotal Income - Rs. 16434.37 Million ( year ending Mar 2009) Net Profit - Rs. -10152.24 Million ( year ending Mar 2009)

The company spice telecom limited provides various kinds of services -voice mail, Mobile radio, MMS, Video tones, my tunes, Spice mute, 32K power packed SIM, and BGM. The company also provides roaming facilities to its customers as a result of which the customer is accessible wherever he travels across the 58 circles around the country, which covers over 1000 destinations. The company spice telecom has a highly technologically advanced network that is GPRS enabled. This has helped the company to provide the best quality of services to its customers and this in turn has helped to increase the subscriber base of the company.

In the Company Spice Telecom Limited equity of around 40.80% belongs to Modi Wellvest and equity belongs 39.20% to Telekom Malaysia Berhad. The company has tie- ups with more than 448 international operators that are spread across 208 countries of the world. And this has helped Spice Telecom Company to serve its customers more efficiently. The total income of the company amounted to Rs.53, 974.3 lakhs in 2005- 2006 and the next year, this figure stood at Rs.70, 227.8 lakhs. The net profit of the Company Spice Telecom Limited stood at Rs.1, 063.4 lakhs and the next year, this figure increased to Rs.1, 978.6 lakhs. This shows that the company has registered sharp increase in its total income and net profit in 1 year.

Launched over ten years ago, Spice’s cellular services have a customer base of over 4 million as on December 2008 in Punjab and Karnataka. Recently Aditya Birla Group owned Idea Cellular took over the ownership of Spice Telecom for over Rs.270 million. They plan to improve the coverage, customer friendliness and good service The market share of Spice had fallen down in Karnataka, after their competitors weaned away many of its customers with good service. In spite of lower tariffs Spice could not regain the market share.

Another problem was that being restricted in only two circles the prepaid users(which form majority of mobile phone users in India) had problems getting their phones recharged with prepaid balance when in roaming. The problem was significance in case of states with small areas like Punjab. Now it is hoped that under Idea cellular things at least this problem is sorted. Spice Telecom now has a customer base of 4.46 Million subscribers in both circles.

Acquisition of spice by idea Idea has acquired Spice Telecom and the deal consists of 4 transactions: Idea will acquire the Modis’ 40.8% stake in Spice (for Rs 2,720 crore). Idea will launch the mandatory 20% open offer for the Spice shareholders, jointly with Telekom Malaysia International (TMI). Idea will merge Spice with itself and offer a 14.99% stake to TMI through a preferential allotment. The Idea-TM combine will launch the open offer at Rs 77.30 jointly with TMI, which now holds 39.2%in Spice

Idea will earn Rs 7,294 crore ($1 Idea will earn Rs 7,294 crore ($1.7 billion, assuming an exchange rate of Rs 43) by selling the 20% stake to TMI(making it one of the largest infusions of FDI into India.) Spice shareholders will get 49 Idea shares (after the TMI preferential allotment)for every 100 shares they hold and the deal is supposed to be over by end of 2008. The deal gives Idea an entry into the Punjab and Karnataka markets, and Spice’s 4.4 million customers, while Spice founders, Modi plans to expand into entertainment, handset business. The Indian telecom space is heating up with deep pocket players’ entry like Virgin and Vodafone.

The buyout of Spice Telecom by Idea Cellular is the fourth largest merger and acquisition deal involving an Indian entity and may be a pre-cursor to more such transactions in the telecom space. The country's fifth-largest mobile operator in terms of subscribers, Idea Cellular would acquire B K Modi-owned Spice group's 40.8 per cent stake in Spice Communications for Rs 2,716 crore.

"The talks are on between Anil Ambani-led Reliance Communications and South African telecom major MTN and the significant premium in Idea-Spice transaction proves the inherent value that Indian telecom space offers for such deals," DSP Merrill Lynch Managing Director Saurabh Agarwal said. Idea would acquire the stake at Rs 77.30 a share representing a premium of 42 per cent over Tuesday's closing price (Rs 54.35). Despite high volatility on the bourses today, the scrip gained more than 35 per cent on the Bombay Stock Exchange.

Shares of the company settled at Rs 72. 35, up 33 Shares of the company settled at Rs 72.35, up 33.12 per cent (a rise of Rs 18 per share). The big ticket deals involving Indian companies include Tata's takeover of Anglo-Dutch steel maker Corus, UK mobile major Vodafone stake acquisition of Hutchison Essar and Aditya Birla Group firm Hindalco's buyout of Novelis.

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