Providence eyes exit from Idea

US-based private equity (PE) player Providence Equity Partners is considering an exit from Idea Cellular, the flagship telecom company owned by the Aditya Birla Group.

Providence holds 9.99 per cent in Idea Cellular. The stake is valued at Rs 2,687 crore (Rs 26.87 billion) at Friday's closing price of the stock.

Providence had bought 15 per cent in Idea Cellular in 2006 for around Rs 1,800 crore (Rs 18 billion) through its investment arm - P5 Asia Investment (Mauritius).

It diluted the remaining 5.01 per cent over the next 5 years. If Providence implements its plan, it will be one of the largest open market exits by any PE fund in India.

According to sources familiar with the development, the Providence management thinks its investment has yielded a decent return and there is no point holding on to the stake as the future looks uncertain in the backdrop of the 2G scam, which has rocked the telecom industry in India.

Sources in Idea Cellular said the tussle between the company and the Department of Telecommunications (DoT) could be the immediate trigger for Providence's plan.

Providence Equity Partners' spokesman, Andrew Cole, did not respond to a detailed email. An Aditya Birla Group spokesperson said the company did not want to comment on market speculation.

Apart from Providence, the other major stakeholders in Idea are TMI Mauritius Ltd (14.07 per cent) and TMI India (5.01 per cent).

The promoters of Idea Cellular hold 46.04 per cent through various entities--Aditya Birla Nuvo (25 per cent),

Birla TMT Holdings, Hindalco Industries and Grasim Industries.

Idea has locked horns with DoT regarding licences common to it and Spice Communications, which it controls. This has spooked international investors.

The Delhi High Court recently asked the company to transfer all six overlapping licences of Spice Communications to DoT and get approval from the department before transferring them back. "This has made investors jittery about their investments," said a source.

The six overlapping licences are Andhra Pradesh, Karnataka, Delhi, Maharashtra, Punjab, Haryana and Kerala. These six circles came to the company after it acquired 41.09 per cent in Spice Communications.

"Investors are concerned about the fact that the circles in question are some of the highest revenue-yielding for the company," added the source.

DoT wanted to charge Rs 50 crore (Rs 500 million) per circle, which meant a total hit of Rs 300 crore (Rs 3 billion).

However, the Telecom Dispute Settlement and Appellate Tribunal restrained DoT from collecting the fine.

DoT has also yet to allot spectrum for the company's 3G licence in Punjab. Idea applied for the licence through the 2G licence formerly held by Spice. It paid Rs 322 crore (Rs 3.22 billion) for the licence.

Idea Cellular acquired Spice in 2008. The merger hit several regulatory hurdles as Spice and Idea held overlapping licences and spectrum in various circles.

Providence handles $22 billion worldwide.