Birla’s group Idea snapped up Spice, one of the last stand alone players in the market. Idea cellular is no angel in white. Spice isn’t the best thing to have happened to mobile industry ever although, they were among the initial telecom players to have 900 Mhz spectrum and were the only big players having a huge monopoly for over 3 years. The promoters, Modi group, made huge amount of money. I remember my time in Karnataka when Spice was hell bent on promoting itself as “Southern Spice” and pioneered the use of minimalist advertising.
It isnt a bad deal for Idea. For the intellectually inclined, here is a spiel from Business Standard (although the link is guranteed to go dead soon):
At Rs 77 per share that Idea is shelling out for the loss-making Spice, the latter is valued at nearly 20 times forward enterprise value /ebitda (EV/ebitda) while at Rs 157, TMIL is valuing Idea around 15 times FY09 EV/ebitda. That’s possibly because at the end of the day Idea is a gainer from the buyout; it will be left with cash, which for a telco that’s planning to become a pan-Indian player and is now present in 13 out of 22 circles, can come in handy. So while Idea will pay Rs 2,700 crore for the stake in Spice, it will get Rs 7,200 crore from Telekom Malaysia, leaving it with a net Rs 4,500 crore.
I am jittery about the Telekom Malaysia investing here in India because they are known to be thugs in the big league. Remember the Salim Group which cosied up with the Left Government in Bengal? They paid a pittiance and got prime land at throwaway prices in order to set up “housing colonies” and malls.
This marks the formation of oligopolies although I am surprised that no other company offered better money for Spice considering the fact that mobile portability is not feasible in present times; most of the original subscribers are loyal to Spice irrespective of their services. It would have been a ready pool of subscribers with an efficient spectrum. There is something fishy on for sure.
Did anyone make any noise about the regulatory approval? Would we ever see anti competitive clauses?