Talks between Idea Cellular, India’s sixth-largest wireless operator, and the BK Modi-owned Spice Telecom on a merger have broken down due to differences in price. The two sides had held preliminary discussions on the possibility of a merger or an acquisition by Idea three-four weeks ago. Idea, which is present in 11 out of the country’s 23 circles, was keen on expanding its subscriber base. But it baulked at the price being demanded by Spice Telecom.
Spice, which offers cellular services in Punjab and Karnataka, had revenues of around Rs 553 crore in 2006. It was looking at a valuation of about $1.3 billion (over Rs 4,300 crore). Idea found it excessive, as Spice does not have a nation-wide presence and continues to make losses.
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ANALYSTS say that if Bharti Airtel’s valuation is taken as the benchmark, Spice would command a price of about $1 billion. But Spice is only present in two circles and is a pure-play mobile company compared with Bharti, an all-India integrated operator. Therefore, Spice’s valuation would be at a discount of 30%-35% to Airtel, or about $650 million-$700 million. Idea officials are also believed to have cited Spice’s weak presence in Karnataka as a dampener. It ranks sixth in the southern state with a share of around 7% despite having made an early start. While most operators have expanded footprint across India after starting with a few circles in the 1990s, Spice has confined to just two circles. It applied for pan-India licences only in September last year.
(Source: Economic times)
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