Providence Gets Big IDEA Stake

Providence Equity Partners is pumping $640 million into a subsidiary of Idea Cellular Ltd. that's extending the Indian mobile operator's network into a new service area. (See Providence Invests in IDEA.)

Providence will get a 20 percent stake in Aditya Birla Telecom Ltd., a wholly owned subsidiary of IDEA that holds the parent carrier's license for the Bihar telecom circle. IDEA, part of the conglomerate Aditya Birla Group , received GSM spectrum for Bihar in January, having been awarded the license in November 2006. (See Indian Gov't Grants Mobile Licenses and Hutch Essar Expands, Scraps IPO.)

The money will help finance the carrier's network rollout in the region, which has the second highest population of India's 23 circles, but the lowest percentage of people with mobile phones.

IDEA runs mobile networks in 11 circles and has recently been awarded spectrum in four other regions, including Bihar.

It plans to launch services in Mumbai and Bihar during the third quarter and in Orissa and Tamil Nadu (including the Chennai metro area) toward the end of the year.

The operator also has licenses for eight other regions where it's yet to receive spectrum. (See A Guide to India's Telecom Operators and India Begins Allocating GSM Spectrum .)

IDEA added 1.04 million new subscribers in April to bring its customer base to 25.04 million, according to figures compiled by the Cellular Operators Association of India . It reported revenues of INR19.72 billion (US$458.3 million) during the quarter ended March 31, the fourth quarter of its financial year. Net profit was INR2.77 billion ($64.29 million).

The capital infusion brings Providence's investment in IDEA to more than $1 billion. Last year the private equity firm acquired a 15 percent stake in the carrier in a pre-IPO private placement worth around $400 million. (See Providence Buys Idea Stake and IDEA Cellular Files for $560M IPO.)

IDEA will transfer its 16 percent share of Indus Towers to Aditya Birla Telecom, giving Providence a 3 percent stake in that company. Indus Towers is a joint venture formed with Bharti Airtel Ltd. (Mumbai: BHARTIARTL) and Vodafone India to share the carriers' mobile tower infrastructure in 16 circles as they expand their network coverage. (See Indian Carriers Form Co. and Indian Operators in Sharing Mood.)

IDEA has indicated that both Aditya Birla Telecom and Indus Towers will launch IPOs in the future, giving backers such as Providence the opportunity to cash in their investments. Tower infrastructure companies like Bharti Infratel and Reliance Infratel have scored large investments from private equity as they head toward IPOs. (See Bharti Sells Tower Stake, Reliance Infratel Files for IPO, and Bharti Infratel Gets $250M.)

— Nicole Willing, Reporter, Light Reading

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