Spice Communications looking at options

04 June 2008

Mumbai: BK Modi Group's telecommunications company Spice Communications  says it is willing to buying out its joint venture partner Telekom Malaysia in the event the Malaysian company is unable to come up with a plan to raise its stake in the company.

Chairman BK Modi had said yesterday that Spice Communications was open to Telekom Malaysia raising its stake to 74 per cent from the current 39.2 per cent. He also said that Spice was also open to the UAE-based Etisalat and others buying a stake in the company (See: Spice willing for Telekom Malaysia raising stake to 74 per cent).

Modi had said that talks were in progress with Telekom Malaysia regarding increasing its stake in the company to the stipulated 74 per cent threshold, though he affirmed that Spice Communications or the Modi family is yet to receive a formal proposal. Telekom Malaysia, being a foreign telecom partner, is allowed to increase its stake to 74 per cent according to prevailing foreign direct investment (FDI) norms for the Indian telecom sector.

If Spice were to acquire the Malaysian telecom firm's stake, the Modi Group could buy out its 39.2-per cent stake, in addition to the Modi family's 40.8-per cent stake in Spice Communications, with other public and financial institutions holding a cumulative 20 per cent of the company. Analysts predict that acquiring Telekom Malaysia's stake in Spice Communications would allow Modi to sell-off the company to other partners.

Spice Communications is also said to be looking at the option of a merger with the Aditya Birla Group's Idea Cellular, which would enable Telekom Malaysia would end up having a stake in Idea.

Media reports predict two scenarios, the first where the Modi family would sell its stake in Spice Communications to Idea Cellular before the merger, and Telekom Malaysia would end up with a stake in Idea post the merger. In the other scenario, Telekom Malaysia may choose to buy out the Modis first, and then pursue the merger with Idea independently.