New Delhi, Jan. 15: Idea Cellular Ltd today snapped up Escotel Mobile Communications Limited (EMCL) and Escorts Telecommunications Limited (ETL) for about Rs 1,200 crore.
The acquisition is one of the largest in the Indian wireless industry.
The deal covers six telecom circles Uttar Pradesh (West), Haryana and Kerala (old licences), Rajasthan, Uttar Pradesh (East) and Himachal (new licences) and more than 8,25,000 subscribers.
In an all-cash transaction, IDEA has entered into a share purchase agreement with the sponsors of EMCL and ETL — Escorts and First Pacific of Hong Kong — to buy the entire equity in both companies. Idea will also absorb the Rs 796 crore debt of EMCL.
The agreement is subject to all statutory approvals and will also require consent of lender groups.
Telecom industry analysts said, “Escorts group managed to get a better deal after the Brahma Group offered to pick the 100 per cent stake last year at a cost of about Rs 400 crore in addition to the deal amount at that time of about Rs 350 crore including the debt component.”
Sources close to the deal said, “We were waiting for the buyer who would also absorb the debt component. Regulatory issues still remain to be sorted out. The deal is much higher than what was offered by Bharti.”
With this transaction, Idea’s subscribers base as of December 31, 2003 will increase from 2.2 million to over 3 million.
The Idea footprint will now cover around 60 per cent of the India's population and over 65 per cent of the potential telecom-market. The newly-acquired circles represent an addition to Idea's existing footprint with all, except Kerala, being contiguous to Idea's existing operation.
The company will have incumbency advantage in as many as seven circles which would entitle the Idea to an additional 2 per cent reduction in license fees for four years from April 1, 2004 which has been granted only to the incumbent first and second operators in non-metro circles.
Commenting on the deal, Vikram Mehmi, CEO, Idea Cellular Ltd., said “Idea has a successful track record in merger and acquisition having itself been formed through a merger of Tata Cellular Limited with Birla AT&T Communications Limited and the subsequent acquisition of RPG Cellcom’s MP circle.”
“Now, with the acquisition of Escotel, the company has again demonstrated its ability to consolidate and grow inorganically. The expansion of footprint brings benefits of scale and synergy to both Idea and Escotel, thus adding huge value to the respective stakeholders,” he added.
