Merrill Lynch - IDEA Spice Merger

Media says Spice Tele to merge with Idea; confirm awaited

Media (CNBC) has flashed that Spice Telecom will likely merge with Idea Cellular. Spice shareholders would reportedly own ~12% of the merged entity. As per media the deal values Spice at Rs45-50bn. Idea is yet to confirm the news.

Spice – 2 circle presence; No.2 in Punjab; weak in K’taka
Spice operates in 2 circles - Punjab & Karnataka. The Co’s wireless sub base totaled ~2.8mn subs as of Apr '07 i.e ~1.7% subscriber mkt share on a pan-India basis. In Punjab, Spice is ranked No.2 (behind Bharti) with ~23% share of total subs. In Karnataka, Spice is ranked No.6 with ~7% mkt share. Latest (Sep ’06) financials indicate Spice is EBITDA positive but makes net loss.

Good strategic fitment with Idea
A merger with Spice would take Idea a step closer to becoming a pan-India operator. Currently, Idea does not have any presence in Spice’s circles.