Mumbai: Providence Equity Partners Llc., a US-based private equity firm managing about $21 billion (Rs90,500 crore), has invested $640 million in Aditya Birla Group-controlled telecom unit Aditya Birla Telecom Ltd, or ABTL, eyeing business growth potential in India, the world’s fastest growing market for mobile phone services.
Watching closely: Managing director of Idea Cellular Sanjeev Aga. Photograph: Ashesh Shan / Mint
ABTL, a wholly owned subsidiary of Idea Cellular Ltd, India’s sixth ranked mobile phone services operator by customers, owns 16% in Indus Towers Ltd, an independent towers unit formed in partnership with India’s biggest mobile phone firm Bharti Airtel Ltd and Vodafone Essar Ltd, ranked fourth. When formed in December, the company had 70,000 towers — half the total number of towers in the country then.
This fiscal year, India, which is adding some 8 to 10 million mobile phone customers every month, is expected to see the addition of up to 60,000 towers as phone firms expand to rural areas. The three-year demand for towers is estimated at 200,000.
Providence bought compulsorily convertible preference shares, which will represent 20% of ABTL upon conversion. The tenure of the shares is 10 years but the conversion could happen earlier in event of an initial public offer.
“ABTL could list in the coming years, although we don’t have definite time frame as of now. We will look at appropriate time, but certainly not in this calendar year,” said Sanjeev Aga, managing director of Idea. The capital raising announced on Thursday will also help ABTL to start services in the Bihar telecom licensed area, which covers the political states of Bihar and Jharkand, in three months, he added.
Merchant bank DSP Merrill Lynch advised Idea Cellular on the deal.
This is the second investment Providence has made in an Aditya Birla company — it had picked up close to 15% for $400 million in Idea Cellular in a placement before the telco’s initial public offer in 2006. Established in 1982, Providence has invested in 100 companies in the media, entertainment, communications and information industries.
Thursday’s deal values ABTL at $3.2 billion. In December, a clutch of financial investors led by Singapore’s Temasek Holdings Pte. Ltd bought a 9% stake in Bharti Infratel Ltd, which in turn owns 42% equity in Indus Towers, for $1 billion, valuing the Bharti firm at $11.11 billion.
Shares of Idea Cellular shed 3.94% to Rs107.35 on the Bombay Stock Exchange, on a day when benchmark index of the bourse lost 1.95%.