Stock Idea - Idea Cellular & Spice Comm.

According to sources, Idea Cellular bought BK Modi’s total stake (40.8%) in Spice Communications. So, Idea needs to make an open offer, according to rules. With this merger, Idea will become the fifth largest telecom player in India. Idea reportedly bought Modi’s stake in Spice at around Rs 72 per share (some are quoting Rs 60). Telekom Malaysia will get proportionate share in Idea which has 39% stake in Idea.

According to sources, Idea Cellular bought BK Modi’s total stake (40.8%) in Spice Communications. So, Idea needs to make an open offer, according to rules. With this merger, Idea will become the fifth largest telecom player in India. Idea reportedly bought Modi’s stake in Spice at around Rs 72 per share (some are quoting Rs 60). Telekom Malaysia will get proportionate share in Idea which has 39% stake in Idea.

Spice stake after Idea buy:

1. Idea: 41%.
2. Telekom Malaysia: 39%
3. Public and institutions: 20%.

Spice is a major player in Punjab and Karnataka circles and has more than 4 million customers. Idea currently has no operations in Karnataka and Punjab and has more than 26 million customers. So buying Spice is a good long term strategic acquisition.

Why Spice is attractive?

Spice has spectrum in 900 MHz band which is lucrative because it can accommodate more subscribers while all others are allotted 1800 MHz frequency. Idea will enter into two new circles and becomes the 5th largest player.

Spice Stock price:

CMP: 51.95.
Idea paid Rs 72 per share. Some sources are quoting it around Rs 60.
Idea will make an open offer at around Rs 70. So almost 40% premium offer.

Verdict: Buy Spice Communications for short term gains. Idea Cellualr is paying more than 20% money for Spice stake to get long term benefits and quick footprint in two lucrative states. I am negative (if it paid Rs 72) on Idea Cellular over short term but positive in long term. We can’t comment on Idea until we find exact stake sale price.

Nothing in this article is, or should be construed as, investment advice. PLS TAKE YOUR DECISIONS.

ROHIT