Spice Communications Ltd, a mobile service provider that boasts of a subscriber base of three million in the Punjab and Karnataka telecom circles, is planning to raise more than Rs520 crore from the capital market through an initial public offer (IPO).
The firm plans to use around Rs177 crore out of the funds raised to pay vendors for network equipment and other capital expenditure for increasing its presence in the existing circles. The rest of the funds will be used for part payment of the company’s long-term debt and for general corporate purposes.
Spice Communications is the second largest mobile service provider in Punjab and the fifth largest in Karnataka. In March 2007, the company had 2.79 million subscribers, accounting for a 14.49% share of the combined market in these two telecom circles.
There are 23 telecom circles in India and the largest mobile service provider, Bharti Airtel Ltd—which operates in all the circles—has more than 40 million?subscribers, holding 31.2% of around 130 million GSM-based mobile services subscribers. GSM, or Global System for Mobile Communications, is a digital standard for mobile or cellular telephony.
“There is a huge potential for growth in the semi-urban and rural market of Punjab and Karnataka,” said Dilip Modi, chairman and managing director, Spice Communications. That is borne out by the fact that the combined mobile service penetration in these two states is only 24%.
Meanwhile, Telekom Malaysia Bhd, Southeast Asia’s second largest telephone company and a 49% stakeholder in Spice Communications, has said that its mobile phone venture in India will invest $140 million (Rs574 crore) during the next two years to expand its networks.
“These two circles (Punjab and Karnataka) have a combined population of 80 million, which is three times that of Malaysia,” said Abdul Wahid Omar, chief executive officer of the Kuala Lumpur-based Telekom Malaysia in an interview at the CommunicAsia telecommunications show in Singapore. Spice Communications is seeking licences to operate in other areas of the country, he added.
Larger operators in India such as Bharti Airtel Ltd and Hutch Essar Ltd plan to spend more than $2 billion each this year to extend their networks.
Spice has already raised Rs112 crore through a pre-IPO placement by selling 24.87 million shares to a clutch of investors, including Lehman Brothers and Spinnaker Capital, at Rs45 per share, recently. The company plans to sell 113.11 million shares at a price between Rs41 and Rs46 each. It has reserved two million shares for its employees. The issue will open on 25 June and close on 27 June. The shares will be listed on the Bombay Stock Exchange.
“Following the public issue, Telekom Malaysia’s stake will come down to 39% from 49%. The promoters’ stake will be 41%, while the rest will be held by the public,” said Modi.
For the six months ended December 2006, Spice Telecommunications’ total revenue was Rs393.94 crore. It has an earning of Rs93.43 crore before interest, tax and amortization. It had posted a net loss of Rs41.8 crore after accounting for interest cost of Rs63.8 crore and depreciation and amortization charge of Rs70.9 crore.
Bloomberg contributed to this story.