MUMBAI, INDIA: Idea Cellular Ltd announced that it will be acquiring the Spice Group stake of 40.8 percent in Spice Communications Ltd  at a price of Rs 77.30 per share. It will also make a payment of approximately Rs 5,440 mn to the Spice Group as non-compete fee.

Idea and Telecom Malaysia International (TMI), along with their affiliates and associates (as persons acting in concert), will make an open offer for an additional 20 percent stake in Spice. The open offer will be made at a price of Rs 77.30 per share.

The Boards of Idea and Spice have also approved the merger of Spice into Idea through a Scheme of Arrangement under Section 391 to Section 394 of the Companies Act, subject to finalisation of the Scheme of Arrangement, the approvals of the respective shareholders, creditors and the respective High Courts of Gujarat and New Delhi, and TMI intends to support this merger. The swap ratio has been determined by SSPA & Co., and Khimji Kunvarji & Co. at 49 shares of Idea for every 100 shares of Spice.

Idea will make a preferential allotment to TMI of 464.73 mn equity shares at a price of Rs. 156.96 per Idea share representing 14.99 percent of Idea's equity capital post allotment.

The primary benefits of this transaction are:

* Idea gains entry in the contiguous wireless markets of Punjab and Karnataka, which account for 11 percent of India's total wireless subscribers.

* Spice, a pioneering operator, delivers a strong running start in Punjab and Karnataka.
-- 4.4 million subscribers as at 30 April 2008, equivalent to a 15.1 percent market share in the two service areas.
-- #2 wireless operator in Punjab with a 22.3 percent market share.

* Idea to consolidate its position with its all-India subscriber market share increasing from 9.5 percent to 11.1 percent. Importantly, Idea would be No.1 in three service areas, in the top 3 in five more service areas, and with a rapidly improving share in all its other operating service areas.

* Idea's operations in the 900MHz GSM spectrum band will increase from the current seven service areas to nine service areas, driving scale economies and operational synergies resulting in lower operating and capital expenditure.

TMI, an emerging leader in Asian telecommunications with over 44 mn subscribers and a presence in 10 countries, will grow its presence in the Indian telecom sector and become a substantial shareholder in Idea.

The primary benefits of TMI's investment into Idea are:

Idea is currently rolling out operations in Mumbai, Bihar, Orissa, and Tamilnadu (including Chennai) service areas, and will also roll out in the remaining service areas of Kolkata, West Bengal, Assam, North East and J&K, after receipt of spectrum. This investment will support Idea's aggressive growth plans.

Idea and TMI will develop areas for business co-operation to leverage TMI's strong presence in 10 principal Asian markets, including neighbouring countries like Srilanka & Bangladesh where TMI is a market-leader. TMI's experience of operating 3G in similar markets will be of value to Idea, as also the convergent interests of the 2 companies in areas extending from international traffic to roaming, to mobile value added services etc. Idea and TMI would sign a Business Cooperation Agreement to this effect

Kumar Mangalam Birla, Chairman, Idea Cellular, said: "This announcement marks a major step in the Aditya Birla Group 's telecom business. Idea has performed strongly, but I believe its best lies ahead. Idea will benefit operationally by leveraging synergies with TMI which will be a significant shareholder in our Company. Further, I look forward to welcoming colleagues from Spice into the Idea family, and indeed the over 100,000 strong Aditya Birla Group. Together we aim to grow a top class organization in the service of our subscribers."

Sanjeev Aga, Managing Director, Idea Cellular added, The strategic import of this move travels beyond Punjab and Karnataka. By the end of the year the Idea yellow will increasingly colour the Indian landscape."

DSP Merrill Lynch acted as the financial advisor to Idea, and Bharucha & Partners acted as the legal advisors. Lazard was the financial advisor, while Norton Rose and Crawford Bayley acted as legal advisors, to TMI.