There was interesting article about Idea Cellular in Business Today in the issue dated Sept. 11 ( unfortunately their website is only for their subscribers- hence I am unable to link to their story ).
“Its about valuation stupid” is the title. Its surprising to see that Tata’s have upped the stake in Idea which has pure play GSM subscribers. This is at the time when they are planning huge investments in their own CDMA network.
I had touched on Idea Cellular in my previous post. Being among the smaller telcos, surprisingly it has stuck out it’s neck and managed to stay afloat. If the story is Business Today can be believed, they are planning for fresh acquisitions in the near future in order to be present across contiguous circles.
I believe that Tata’s may be eyeing the futue revenues; despite the claims, it isnt very interesting market after all. Ho hummed by restrictive licences and government policies changing like shifting sands ( of course the mumbling mandarins sitting high up in the plush offices add insult to injury); major telcos have remained out of the loop. For example, it could be NTT’s DoCoMo ( if thats right ) in Japan, which could size up the potential in Indian market and decided not to enter in the “fastest growing market”.
Coming back to Idea, Birla’s ( other partner in this venture) would be glad to offload the same given the right “valuation”. Licences have been acquired at great costs ( hidden as well as apparent- remember India is among one of the most corrupt nations in this world!); they are coveted as the Indian tradition of having a son in the family at the expense of the girl child.
I still stand by my earlier report that Idea maybe sold to some kind of a consortium in the near future; one reader had expressed his dissent. Meanwhile the IPO isnt’t in the wings anywhere in the near future. I wouldnt comment on the rising sensex; fear of another bubble indeed.
Its assinine that Tata’s may compete against themselves for the customer pie; they are way behind in CDMA roll out. Upping the stake in Idea Cellular tantamounts to shooting their own foot; depsite their denial. In the short term, yes. In the long term, I wonder whether Idea would be “appealing” given the fact that they have the lowest customer base. It maybe the second costliest mistake of Tata’s. The first one? You guessed it. Their CDMA business!