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Spice Telecom Seeks Savory IPO

Light Reading
LR Mobile News Analysis
Light Reading
2/23/2007

Spice Telecom , a regional mobile operator in India, has filed the paperwork for an IPO that will help it repay some debt and expand its network.

According to a draft prospectus filed with the Securities and Exchange Board of India, Spice will offer 137.96 million shares -- about 20 percent of its capital -- for listing on the National and Bombay stock exchanges. Owners MCorpGlobal and Telekom Malaysia Bhd. will each put up a 10 percent stake, reducing their holdings to 40.8 percent and 39.2 percent respectively. (See TM Acquires Spice Stake.)

The company will determine the price of the shares through the book-building process, but has previously indicated that it's looking to raise between $250 million and $300 million from the offering. (See India's Spice Plans $300M IPO.)

With recent telecom IPOs in India boasting massive oversubscription rates, it's likely Spice will be able to price at the high end of its target.

Rival operator Idea Cellular Ltd. , for example, saw its IPO oversubscribed 57 times last week, while demand for shares in software development firm MindTree Consulting Pvt Ltd. exceeded the offering 103 times. Mindtree today priced the listing at 425 Rupees ($9.60) per share. (See 3GSM: India News Roundup.)

Spice is the seventh largest carrier in India, offering mobile services in the Punjab and Karnataka regions. The filing states that as of December 31, 2006, it had 2.45 million subscribers and a combined market share of 14.26 percent in those areas.

Like India's other regional operators, Spice has applied for new licenses that will allow it to become a national player. (See Indian Mobile Set to Spread.) Its ambitious network expansion plan will see it branch out from 2 to 22 regions if the licenses are granted. It has also applied for national and international long-distance licenses "because providing these services could provide additional revenue streams at a relatively low marginal cost," the filing states.

Based on a quote from Wipro Ltd. , Spice says it expects to spend Rs 170 million ($3.84 million) to set up its long distance services, including softswitches and media gateways from Veraz Networks Inc. (Nasdaq: VRAZ) It's looking to establish points of presence in the U.S., U.K., and Singapore. The license fee will cost an additional Rs 475 million ($10.73 million).

Spice borrowed $265 million last April to help fund its expansion, and it plans to use 50 percent of the cash raised from the IPO to pay off some of that debt.

— Nicole Willing, Reporter, Light Reading

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