Further Consolidation in India's GSM Market

India's GSM network operator, IDEA is to buy the GSM operators, Escotel Mobile (EMCL) and Escorts Telecommunications (ETL). The transaction includes 6 telecom licenses and more than 825,000 subscribers. In an all cash transaction, IDEA has entered into a share purchase agreement with the sponsors of EMCL and ETL, i.e. Escorts and First Pacific, to buy their 100% equity stake in these companies.

With this transaction IDEA's subscribers base as of 31-Dec-03 will increase from 2.2 million to over 3 million. The IDEA footprint will now cover around 60% of the India's population and over 65% of the potential telecom-market. The newly acquired licenses represent an addition to IDEA's existing footprint with all, except Kerala, being contiguous to IDEA's existing operation. The Company will have incumbency advantage in as many as 7 license "circles" which would entitle the Company to an additional 2% reduction in license fees for four years from 1-Apr-04 which has been granted only to the incumbent 1st and 2nd operators in non-metro circles.

Commenting on the deal, Mr. Vikram Mehmi, CEO, IDEA Cellular said "IDEA has a successful track record in M&A having itself been formed through a merger of Tata Cellular Limited with Birla AT&T Communications Limited and the subsequent acquisition of RPG Cellcom's MP circle. Now, with the acquisition of Escotel, the company has again demonstrated its ability to consolidate and grow inorganically. The expansion of footprint brings benefits of scale and synergy to both IDEA and Escotel, thus adding huge value to the respective stakeholders."

IDEA is an equal three way joint venture between the Aditya Birla Group, the Tata Group and AT&T Wireless and provides cellular services in the circles of Andhra Pradesh, Delhi, Gujarat, Maharashtra and Madhya Pradesh.

IDEA in its current shape was formed with the merger of Tata Cellular Limited (TCL), cellular service provider in Andhra Pradesh Circle, with Birla AT&T Communications Limited (BACL), cellular service provider for the Gujarat and Maharashtra Circles and subsequent acquisition of BTA Cellcom Limited (BTACL), a cellular service provider for Madhya Pradesh Circle and the award of 4th cellular license for Delhi Metro Circle. IDEA has a cellular subscriber base of 2,241,427 as at the end of 31-Dec-03."

Posted to the site on 28th January 2004