STT, Telekom to acquire part of Tata stake in Idea

By SiliconIndia   |   Tuesday, 21 September 2004, 07:00 Hrs
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NEW DELHI: STT and Telekom Malaysia (TM), the new 33% partners in Idea Cellular, are learnt to have reached an agreement with the Tata and AV Birla groups for a partial buyout of their stakes in the company, reports an Indian daily.

The proposed buyout, according to the daily, is part of the STT-TM combine’s proposal to increase its stake in the company to 49%. The rest of the stake hike is proposed to be done through the preferential issue route. The Tatas and AV Birla groups currently hold 33% each in Idea Cellular.

Though the exact percentage of stakes to be bought from the two Indian allies could not be known immediately, sources close to the situation said it may be just 2-3%. “More than the extent of stake sale, it is being done for the valuation purpose,” sources said. Earlier, the STT-TM combine was planning to hike their stake to 49% entirely through the preference share route, reports Economic Times.

Earlier, the STT-TM combine was planning to increase their stake to 49% entirely through the preference share route. This would have led to the dilution of the stakes of the Birlas and the Tatas to about 25% in the company.

In a related development, the STT-TM combine has also vetoed the company’s plans for an immediate IPO. When contacted, Idea CEO Vikram Mehmi, however, refused to comment on the shareholder as well as the IPO issues.

The foreign partners are learnt to have opposed the company going in for a public float in the near future, as it would not help the company to fetch “the right valuation”. Instead, the STT-TM combine, sources said, proposes to bring in additional funds and equipment required for the company’s immediate expansion plans.

The move, however, could have implications for the Tatas and AV Birla group as this would further dilute their bargaining strength for getting a good price for their holdings in the company.

This may have prompted the two Indian partners to force the STT-TM combine to agree for a partial stake buy from them, as this would help them to get a benchmark on valuation of their stakes in the company.

STT-MT combine is expected to invest an additional $200m in Idea Cellular, besides the $200m used to buy out AT&T’s stake.

While the two Indian promoters have earlier indicated they would like to exit from Idea, STT and TM are believed to be interested in increasing their stakes to 74% in Idea Cellular by buying out more of the Birla and Tata groups’ holding.

STT and TM had jointly bid for AT&T’s stake in Idea — a three-way venture with the Birlas and Tatas — after AT&T decided to exit from the Indian venture following Cingular’s buyout of AT&T in the US. Singapore-based information and communications company STT is a wholly-owned subsidiary of Singapore Technologies. Telekom Malaysia International is the overseas investment arm of Malaysia’s communications company Telekom Malaysia Berhad.

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