Idea, Spice may call off deal

Idea Cellular and Spice Telecom might call off their proposed merger talks. The two companies were unable to come to terms on the valuation, and also on the future structure of the management to run the merged entity.

According to a source close to the development, Spice Telecom will go ahead with its planned initial public offering.

"The deal seems to be off, at least for the moment. Valuation is believed to be key issue, while differences in sorting out of management and operational issues of the joint company also played a part," the source told Business Standard on Thursday.

Spice Telecom, which has received approval from the Securities and Exchange Board of India, would go ahead with its Rs 600 crore IPO.

Spice Telecom chairman B K Modi declined to comment on the issue. Idea Cellular spokesperson also declined to comment.

At present, Idea has operations in 11 circles including Delhi, Maharashtra, Gujarat, Andhra Pradesh, Kerala and Haryana among others (with a total subscriber base of over 15 million) and licences in Mumbai and Bihar, while Spice operates in two circles in Punjab and Karnataka (with a subscriber base of 2.8 million).

The combined entity would have had a market share of over 11 per cent in the mobile space. However, even after the merger, the company would remain the fifth largest mobile operator in the country-far behind Bharti, Hutch, BSNL, Reliance and Tata Teleservices.

Telekom Malaysia which already holds over 49 per cent equity stake (which it bought for over Rs 730 crore in Spice has been looking at expanding its base in India beyond just the two circles.

The Malaysian company is also not new to Idea Cellular because nearly two years ago it had (with Singapore Technologies Telemedia) agreed to acquire 47 per cent equity stake in the company for $390 million, but the deal did not get the government nod.