Thursday, June 26, 2008

TM International now with big stake in huge telco in India

Telekom Malaysia International (TMI) is making further inroads in India.

Quoting from Reuters

NEW DELHI/KUALA LUMPUR, June 25 (Reuters) - Malaysia's TM International (TMIT.KL: Quote, Profile, Research) will pick up around a fifth of Indian mobile operator Idea Cellular (IDEA.BO: Quote, Profile, Research), bolstering its presence in the world's fastest-growing mobile market, after a takeover of a smaller Indian firm in which it held a stake.

Idea, India's fifth-largest mobile operator, said on Wednesday it will buy a 40.8 percent stake in smaller rival Spice Telecom (SPCM.BO: Quote, Profile, Research) for 21.76 billion rupees ($508 million).

TM International's 39.2 percent stake in Spice will be converted into Idea shares, and it will pay 72.9 billion rupees ($1.7 billion) for a preferential allotment of 14.99 percent. TM International is a unit of Telekom Malaysia (TLMM.KL: Quote, Profile, Research).

India's mobile market is the world's second-largest after China and foreign firms are keen to enter the market. Last year, Vodafone Plc (VOD.L: Quote, Profile, Research) paid $11 billion for a controlling stake in the No. 3 cellular operator.

"We have a 39.2 percent stake in a company which (covers a) population of 80 million. Now we will have an around 20 percent stake in a company which has 700 million," Yusof Annuar Yaacob, group chief financial officer at TM International, told Reuters in Kuala Lumpur.

"For us, it's a much better position to move forward with our business," he said, adding the deal was expected to be completed by April 2009.

Idea, along with TM International, will make a mandatory open offer for another 20 percent of Spice at 77.3 rupees per share, the same price it will pay Spice's founders for their stake. The price is a 42 percent premium to Tuesday's close.

Spice shares, which listed last July, surged 33.1 percent to a record close of 72.35 rupees in a market that rose 0.8 percent.


Idea said TM International would remain a minority partner.

"We have a very clear understanding. Telekom Malaysia will not go above 20 percent. So there is a cap there. They have one board seat," Chairman Kumar Mangalam Birla told a news conference.

Idea, part of the Aditya Birla Group, operates in 11 of India's 22 telecoms circles or service areas, and has approval for the other 11.

It said the deal gave it ready-made entry to the Punjab and Karnataka circles, which account for 11 percent of the Indian market, and the TM International investment would support its aggressive growth plans.

"It takes Idea very clearly into a very high-growth trajectory and into the big league," Birla said, adding Idea planned capital expenditure of 100 billion rupees over the next two years.

Idea also said would use the Malaysian firm's 3G expertise.

A combined Idea-Spice would have more than 30 million subscribers. Bharti Airtel (BRTI.BO: Quote, Profile, Research) is India's top mobile operator with 64.4 million subscribers at the end of April, followed by Reliance Communications (RLCM.BO: Quote, Profile, Research) with 47.4 million.

Vodafone-controlled Vodafone Essar has 45.8 million subscribers and state-run Bharat Sanchar Nigam has 41.3 million. Idea is buying its stake from Spice's founders, the Modi family, who said TM International had been pushing for the deal.

"The deal has been the brainchild of Telekom Malaysia," Spice Chairman Bhupendra Kumar Modi told NDTV television.

"They are the one who wanted stake in an all-India company. It was Telekom Malaysia who put all the puzzles together to make the deal happen."

Idea Cellular shares ended up 2.9 percent at 102.05 rupees, while TM International shares were suspended from trading in Kuala Lumpur ahead of the announcement.

DSP Merrill Lynch acted as the financial adviser to Idea, and Lazard was the financial adviser to TM International. Enam Securities and Lehman Brothers advised the Modi family. ($1=42.8 rupees) (Additional reporting by Rakesh Sharma and C.J. Kuncheria in NEW DELHI and Narayanan Somasundaram in MUMBAI; Editing by John Mair and Lincoln Feast)

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