India Inc. at Digital Inspiration

Idea-Spice-Telekom Malaysia deal - What is the best case scenario?

Posted: 11 Jun 2008 03:29 AM CDT

The much written about stake sale of Spice Communication is still witnessing its own turn of new permutations and reports for the exact contour of the deal, though nothing has been officially confirmed.

One thing which emerges from the news reports is that the Modis would exit Spice for sure by selling its entire stake. The reason being, that Spice is a loss making company with limited operations in Karnataka and Punjab, inspite of being among the oldest telecom player in India. Also Modis need money for pursuing its bid to buyout stake in Sony Entertainment Television.

As far as Idea Cellular is concerned, Spice is the best fit for its operations as it does not have its own operations in Punjab and Karnataka, and through Spice it would get 4.4 million customers and 900MHz spectrum making it fifth largest mobile operator above Tata Tele.

As far as Telekom Malaysia is concerned, it would like to grow its Indian operations as it complements its operations in other South East Asian nations.

The likely scenarios for the deal are that Idea buys out entire stake held by Modis and Telekom Malaysia get proportional stake in Idea Cellular which works around 5.8% stake.

Another possibility is TM buys stake in Idea, then Idea buys out Modi's stake and merges Spice with Idea.

This deal is a likely possibility as it's a win-win situation for all, as Modi will get his desired amount while Idea will maintain its majority stake and also get benefit of experience and expertise of Telekom Malaysia. And for TM too, it makes way for pursuing its Indian operations.

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