Mumbai, July 30: The market for telecom deals is buzzing again.
The Tatas and the Birlas today announced their decision to buy out their foreign partner ' Cingular Wireless of the US ' in Idea Cellular.
The AV Birla group and the Tatas will be forking out about $150 million each to acquire the 32.91 per cent stake that Cingular holds in the mobile telephony company that provides cellular services in Delhi, Maharashtra (excluding Mumbai), Goa, Gujarat, Andhra Pradesh, Uttar Pradesh (west), Madhya Pradesh, Chhattisgarh, Uttaranchal and Kerala.
The total deal is valued at Rs 1,300 crore. After the acquisition of the Cingular stake, the Birlas’ share in the venture will cross 50 per cent, while the Tatas will hold a little less than 49 per cent. The Birlas now hold 34 per cent and the Tatas a little over 32 per cent.
Sanjay Aga, a director representing the Birlas on the Idea Cellular board, said the Cingular stake would be equally shared between the Birla group and the Tatas.
The announcement of the deal comes just 10 days after the Rs 4,400-crore deal under which the Essar-Hutch combine bought out BPL’s mobile operations.
The Birla decision to raise its stake in the venture will end speculation that they are looking to get out of the telecom business. Some weeks ago media reports had suggested that the AV Birla group would sell the stake to the Tatas.
The Tatas already have a presence in the CDMA space ' the mobile technology that rivals the GSM service that Idea provides ' through Tata Teleservices. Idea Cellular has a subscriber base of 5.72 million giving it a market share of a little over 12 per cent.
Cingular’s plan to sell its stake in Idea have been doing the rounds for several months. Last December, it had reached a tentative agreement with Singapore Technologies Telemedia (STT) and Telekom Malaysia under which the Asean cellular twins would buy out the stake for $390 million.
The deal with STT and Telekom Malaysia was snarled in bureaucratic hurdles that stemmed from the fact that STT’s sister company, Temasek, had a stake in Bharti Televentures, Idea’s rival in a number of cellular circles.
The department of telecommunications (DoT) refused to clear the deal with the Asean twins since the telecom policy expressly forbid a foreign partner from holding a stake in competing telephony operators.
The STT-Telekom Malaysia offer was on the table till June 11 but the Tatas weren’t able to swing the requisite government approvals by then. When STT dropped out, Telekom Malaysia gamely tried to go it alone but had to back out when faced with regulatory hurdles.
Idea was the first company in the country to launch GPRS (general packet radio services) in November 2002.