The Modi – (Telekom) Malaysia Lock Out for SPICE
Another Guest Post by ‘pretty boy‘ Abhinandan Nardekar
The buzz in the Indian telecom industry is just refusing to die down. Close on the heels of talks of Bharti-MTN merger [which eventually turned out to be a damp squib], comes another killer punch. This one is from the much lesser talked about minnow – Spice Communications.
It seems that Spice Communications owner B.K.Modi is plannning to buy out its partner Telekom Malaysia[T.M]. This is because TM has failed to come up with a stake raising plan. By now it is common knowledge that they both share a very frosty relationship [as is true with various other Indian & foreign partners… Remember Britania - Danone ??]. But this I think is a very smart move on Modi’s part. Currently the Modi family owns 40.8% in Spice while TM owns 39.2%. Buying out TM will give the Modis a controlling stake in the company and this what making the two warring factions salivate [figuratively of course! ]. Ultimately both the owners I guess want to sell their stake in the company. But a majority stake will fetch them a much higher premium than a minority one. This shouldn’t be much difficult given the sky-high valuations currently prevalent in the Indian telecom space [Milking the cow, huh?]. Besides exiting the company in the present situation makes sense as its financial health just refuses to improve[just have a look at the recent losses it posted !]. Also Spice exists in only 2 circles- Karnataka & Punjab and for it to break even it is almost necessary for it to have a pan-India presence. This again requires further capital infusion which both the partners are not ready to do [Caught between the Devil and the Deep Sea? A very loud and clear YES!]
However the circles have a very high ARPU[Average Revenue Per User] compared to the rest of India. This has caught the attention of the Idea group which it seems is actively involved in hectic parleys. Meanwhile Mr. B.K.Modi has said that he will not settle for anything less than Rs 60/share if anyone is interested in buying him out. Looks like the Modis are set to have their cake and eat it too! [Bored of the clichés? Me too 
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