Has it been a case of a telecom deal being so near but yet so far? That could well be the case as far as the proposed merger between Idea Cellular and Spice Communications goes. What started off as a serious round of negotiations seems to have fallen through, say sources, on account of valuations and Spice's demand for a higher stake in the merged entity.
On the face of it, the deal would have made good business sense for both the sides. Spice operates in two circles-Karnataka and Punjab-which seem to fit well into the existing operations of Idea. The Aditya Birla Group-owned Idea Cellular provides services in 11 circles.
Spice, between its two circles, has a total subscriber base of just over 3 million with Punjab alone accounting for over two-thirds of that. Idea's subscriber base recently crossed the 15-million mark.
It is gathered that Spice wanted a 13-14 per cent stake in the merged entity which was not acceptable to Idea. When contacted, Sanjeev Aga, Managing Director, Idea Cellular, declined to comment.
Interestingly, Spice Communications had filed its offer document with the Securities and Exchange Board of India (SEBI) for a Rs 600-crore issue. B.K. Modi, Chairman, Spice Communications, declined to take any questions on the issue or the deal with Idea citing the silent period, which prohibits the company from making any comments.
Meanwhile, media reports have suggested that Aircel Cellular-where Malaysia's Maxis holds a 74 per cent stake-apart from Spice and Idea are in dialogue for a three-way merger.
According to V.K. Sharma, Director & Head of Research, Anagram Stock Broking, it could get difficult for smaller players like Spice. "They have limited time at their disposal. If their market shares in these circles start falling, it will have an effect on their valuations and to that extent, it will make sense to align with a larger player," he says. Watch this space.
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