Modi set to sell stake in Spice Communications to Idea Cellular

According to sources close to the development, Idea has offered to buy 40.8 percent stake from the Modi Group, promoters of Spice Communications. While Telekom Malaysia holds 39.2 percent stake in the company, the remaining stake is in the hands of the retail and institutional investors.

Earlier, Spice Communications chairman B.K. Modi said it was considering a stake sale and had been approached by UAE-based Etisalat and others, including NTT DoCoMo and AT&T. Stakeholder Telekom Malaysia had also expressed interest in buying the stake.

The reason for selling the stake, Modi said, was to raise funds for business expansion. Spice Communications operates in only 2 of the 23 circles – Karnataka and Punjab - and has licenses to operate in four more.

According to market analysts, Modi could opt for either of the two routes – [1] sell 34.8 percent of his stake to Telekom Malaysia (as Indian laws permit a maximum of 74 percent foreign holding in Indian telecom companies) and the remaining 6 percent to Idea, or [2] sell 10 percent stake to Idea (as Indian laws do not permit more than 10 percent cross-holding in telecom companies) and the remaining stake (30.8 percent) to Telekom Malaysia (which, after the deal, would hold 70 percent in Spice Communications).

Hence, Modi said he would not take any final decision before hearing from Telekom Malaysia and receiving its proposal.