IDEA Cellular Files for $560M IPO

Fresh from winning new licenses to expand its network, Indian regional carrier IDEA Cellular Ltd. has filed a draft prospectus with the Securities and Exchange Board of India detailing its plans to raise 25 billion rupees (US$559.97 million) through an IPO early next year.

The company, owned by the Aditya Birla Group , has completed the first phase of a major expansion plan and last month received a national long-distance license along with permission to extend into two new regions of India. (See Birla's Big IDEA for India.)

IDEA says it will use the bulk of the IPO proceeds to finance the next phase of the buildout, which it expects to complete by March 2008.

India's fifth largest carrier, IDEA had 10.36 million subscribers as of September 30, compared with 7.37 million at the end of March. Revenues over that same period were Rs 19.13 billion and net income was Rs 1.92 billion.

According to the filing, IDEA had spent Rs 4.68 billion ($104.83 million) as of September 30 to take its network from 8 to 11 regions. It expects to spend another Rs 9.79 billion ($219.29 million) on that expansion and Rs 6.47 billion ($144.92 million) to establish services in the Mumbai and Bihar regions covered by the new licenses. The carrier also notes that it has filed applications for another 9 regions to take its network nationwide.

The beneficiaries of all this spending are likely to include existing equipment suppliers Ericsson AB (Nasdaq: ERIC), Nokia Corp. (NYSE: NOK), and Siemens Communications Group -- the usual suspects -- which should see contracts rolling in during the first and second quarters next year. Part of the $105 million IDEA has spent so far has come from vendor financing. The carrier intends to place orders with equipment vendors "during the period February to June 2007," the IDEA filing states.

IDEA has also shelled out Rs 25 million ($559,973) for a national long-distance license that will allow it to carry its own subscriber trunk dialing traffic and save on carriage charges that it now pays to other operators. The carrier estimates that Rs 5 billion ($111.99 million) of its ongoing capex until March 2008 will go towards deploying a TDM backbone with an IP overlay, in addition to Rs 808 million ($18.1 million) it will cost to set up the network.

IDEA expects to spend Rs 604 million ($13.53 million) on switching and billing contracts with Ericsson, the new Nokia Siemens, and Alcatel-Lucent (NYSE: ALU), and Rs 204 million ($4.57 million) on last-mile connectivity from vendors including Fibcom , ECI Telecom Ltd. , and Tejas Networks India Ltd. .

Last month, Aditya Birla raised $980 million in a private placement with six private equity firms for a 33.14 percent stake in IDEA. It sold 15 percent to Providence Equity Partners , and TA Associates says it has made a "significant minority investment" in the company. (See Providence Buys Idea Stake and TA Gets IDEA Stake.) The other investors were Macquarie Bank , Spinnaker Capital Group , ChrysCapital , and Citigroup . Sequoia Capital has since bought a 1.5 percent stake for $48 million, according to reports.

IDEA's listing is one of several upcoming IPOs in the Asia/Pacific region. (See Telecom IPOs Blossom in Asia/Pac.)

— Nicole Willing, Reporter, Light Reading