Idea offers to buy 61% stake in Spice for $757m

Bangalore: Idea Cellular Ltd., the fastest growing of India's five biggest mobile-phone carriers, offered Rs32.4 billion ($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 per cent stake from MCorpGlobal Communications Pvt. for Rs77.30 a share and will make an open offer for a further 20 per cent at the same price, 41 per cent 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 subscrib-ers 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.

Spice surged as much as 32 per cent in Mumbai and traded at Rs72 at 1:40pm local time. Idea climbed 2.3 per cent, the most since June 12.

Idea, India's fifth-largest mobile-phone operator, will also offer 49 Idea shares for every 100 Spice shares for the ensuing takeover.

TM stake

After the takeover, Idea plans to sell 464.7 million shares of the combined company at Rs156.96 apiece to TM International Bhd., Malaysia's second-largest wireless carrier, the New Delhi-based carrier said. TM owns 39 per cent 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 per cent" of a smaller company, he said.