Corporate giants Tatas and the A V Birla group on Saturday announced their decision to buy out the stake of their foreign partner Cingular Wireless in the joint venture Idea Cellular for about Rs 1,300 crore (Rs 13 billion) to demonstrate their strong interest in the telecom business.
Sanjiv Aga, a director of Birlas on the Idea Cellular board told PTI from Mumbai on phone that the 32.91 per cent stake in Idea Cellular could be equally shared between Birla group and Tatas.
Aga said the decision to buy out the stake from Cingular (along with the Tatas) is an indication of their strong interest in telecom sector.
When contacted Kishor Chaukar, managing director, Tata Industries, said they would buy half of the 32.91 per cent stake of Cingular in Idea for a consideration of $150 million.
"This is reflective of our strong interest and there is opportunity for all the serious players in the segment," he said when asked about the rationale for Tata to increase stake in a GSM operator at a time when the group's main focus appeared to be on CDMA segment.
Post restructuring, AV Birla group company would increase its stake from present 34 per cent to over 50 per cent while Tata Industries stake would stand increased to just less than 49 per cent.
Even with a majority stake in Idea Cellular, Aga said both the partners would work as equal partners in the company.
Asked about the reason behind Cingular's exit from the venture, he said the North American telecom company is exiting the telecom venture to focus on its core competence and telecom was outside its strategic focus areas.
Cingular's move to sell its stake to Birlas and Tatas comes closely in the wake of the Department of Telecom spiking a bid by a consortium of Singapore Technologies Telemedia (STT) and Telekom Malaysia (TM) to acquire it, citing regulatory reasons where cross-holding of over 10 per cent is not allowed in the same circle.
Tatas are the number two operator in the country in the CDMA mobile services arena and have 45 lakh (4.5 million) subscribers as per the latest figures.
Idea Cellular had a subscriber base of 5.55 million in June and added 0.17 million new users in the month taking its market share to 12.36 per cent.