Mergers, Acquisitions and Takeovers Case Study

Idea Cellular's Acquisition of Spice: Consolidation Trend in the Indian Telecom Industry

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Abstract:
The Indian telecom players' fight for dominance intensified in 2008 with Idea Cellular, the fifth-largest mobile operator's acquisition of smaller rival Spice Communications. Spice had remained an acquisition target for a while, with operations in two high quality circles which Idea Cellular did not have access to. The acquisition deal increased Idea's operations and more significantly created a debt-free balance sheet. The deal signified there was no place for telecom companies with limited operations in the world's rapidly growing wireless market. This case examines the effect of the deal on both companies and discusses whether other telecom companies would follow suit in order to stay competitive in a regulated environment.

Pedagogical Objectives:

• To analyse the changing business landscape of the Indian telecom industry
• To discuss the strategic rationale of the acquisition deal.
• To understand the merger deal challenges and benefits to both players.

Keywords : Consolidation, Merger and acquisition, Indian telecom industry, National telecom policy, Birla Group, Telekom Malaysia International (TMI), Idea Cellular, Spice Communications, Spectrum, Pan India presence, BK Modi group, Circles or service areas, Third generation technology (3G), Wireless market, Competitive dynamics

Contents : 
Indian Telecom Industry
National Policy Targets for 1994
National Policy Targets for 1999
Impact of Steps Taken for Increasing Growth
Subscriber Growth and Effective Charge
Restructuring the Tariff
India Telecom Market Share
Idea Cellular and Spice Communications: The Merger Deal
Modi Group Companies
India’s Telecom Service Areas and Operators
Major M&A Deals in Indian Telecom Sector