Modi set to sell stake in Spice Communications to Idea Cellular

In any case, analysts feel the final aim is to merge Spice Communications with Idea and bring in Telekom Malaysia as a strategic partner.

Meanwhile, Etisalat has reportedly backed out from the bidding war as it found the asking price per share way too high. A source close to the development said the telecom company was ready to pay Rs.60 per share but decided to back out when Rs.70 per share was quoted as the asking price. The final asking price might hover near Rs.90 per share, the source said.

Idea Cellular is the fourth largest GSM operator in India, after Bharti Airtel, Vodafone-Essar and state-run Bharat Sanchar Nigam Ltd (BSNL). It has a subscriber base of over 26 million while Spice Communications has a subscriber base of more than 3 million.

According to market analysts, acquisition of Spice Communications would help Idea foray into Karnataka and Punjab where it has no operations. Idea currently operates in 11 circles - Andhra Pradesh, Delhi, Gujarat, Haryana, Himachal Pradesh, Madhya Pradesh, Chhatisgarh, Maharashtra, Goa, Rajasthan and UP.

Thanks to call rates of as low as one US cent a minute, availability of cheaper handsets and expansion of networks to smaller towns and rural areas, the Indian mobile market has leapfrogged the US to become the second largest (after China) and the world's fastest growing mobile market in the world. With Indian operators adding 8-9 million subscribers a month, at the end of April, total number of mobile users stood at 269.30 million, data from the telecom regulator Telecom Regulatory Authority of India (TRAI) showed.

According to market analysts, mobile users in India have jumped 25 times between 2002 and 2007, but the potential for growth remains huge as just 23 percent of the billion-plus population has a mobile phone.