India news special: Providence takes Idea stake; TA Associates and ChrysCapital to follow?

27 Oct 2006

US-based Providence Equity Partners has acquired a 15% stake in India’s Idea Cellular from Aditya Birla Group, the company said in a statement. A source close to the transaction said that the investment was worth USD400 million. It also appears that private equity firms TA Associates and ChrysCapital are close to acquiring stakes in Idea, though this has yet to be confirmed by either Idea or Birla. Birla has been looking to offload a stake in Idea since acquiring Tata Group’s 48.14% stake in the cellco for USD969 million, raising its own indirect holding to 98.3%.

According to TeleGeography’s GlobalComms database, Idea launched GSM services in Gujurat in January 1997. Originally known as Birla Tata AT&T Communications after its three major investors, the cellco was renamed Idea in May 2002. Cingular Wireless of the US acquired a stake via its takeover of AT&T Wireless in late 2004 and put it up for sale. In November Telekom Malaysia and Singapore Technologies Telemedia (ST Telemedia) agreed to buy the shares, but the deal was spiked by the Indian government, citing infringements of regional cross-holding regulations. Finally, in July 2005, after months of negotiations, existing Idea shareholders Tata Group and Aditya Birla Group agreed to buy equal parts of Cingular’s 32.91% stake for a total of USD300 million. The deal brought Tata’s holding in Idea to a little over 48% and Birla’s to just over 50%, and included the provision for Birla to take the entire stake if Tata fell foul of the same regulations that halted the Singapore-Malaysian buyout bid due to its existing telecoms interests. Idea’s licence footprint covers 60% of India’s population and it has more than ten million mobile subscribers and operations in Delhi, Maharashtra, Goa, Gujarat, Andhra Pradesh, Madhya Pradesh, Chhattisgarh, Uttaranchal, Haryana, Upper Pradesh (West), Kerala, Rajasthan and Himachal Pradesh. It plans to extend its network to Upper Pradesh (East) by the end of 2006.

India, Vi (Vodafone Idea Limited, VIL)