US firm buys 20% in Idea for $640 million

Aditya Birla Telecom Ltd (ABTL), a wholly-owned subsidiary of Idea Cellular, will offload 20 per cent to Providence Equity Partners, a US buyout firm, for Rs 2,560 crore.

This takes Providence's total investment in Idea Cellular to $1.04 billion, which is the largest private equity investment in an Indian telecom service provider. The deal values ABTL at Rs 12,800 crore.

ABTL is a Universal Access Service Licence (UASL) holder with permission to provide telecom services in the country, in the Bihar circles (comprising the states of Bihar and Jharkhand).

"Earlier, Providence Equity had invested $400 million in exchange for 12.5 per cent equity. ABTL will use the funds for expansion like network rollout and ongoing operations, with the company very close to launching services in the Bihar circle," Idea Cellular Managing Director Sanjeev Aga said.

ABTL, which was allocated spectrum for 3G rollout in the Bihar circle, was looking at rolling out the services in the next three to four months.

ABTL may be listed on the stock markets at an "appropriate time", Aga said.

After offloading the 20 per cent stake -- which requires regulatory approval and is expected to be closed by August this year -- Idea Cellular will hold the remaining 80

DSP Merrill Lynch was the sole financial advisor to Idea on the transaction.

ABTL will also look at an initial public offering (IPO) and subsequent listing in the "medium term", Aga said, but did not provide a timeframe.

This is the only private equity investment in an Indian telecom operator, though passive infrastructure companies like Reliance Infratel had received investments.

Meanwhile, Idea Cellular will also transfer its 16 per cent stake in Indus Towers -- a tower joint venture firm among Bharti Airtel, Vodafone-Essar and Idea Cellular -- to ABTL. Indus Towers owns 70,000 base transceiver stations (BTS), of which 12,000 belong to Idea Cellular.

Idea Cellular has licences to operate in all the 22 circles, while it has already launched operations in 11 service areas and has a customer base of over 25 million.