Spice IPO likely by month-end

Spice Communications, part owned by Telekom Malaysia Bhd, will announce this week the amount it plans to raise from an initial share sale, to expand beyond Punjab and Karnataka. "In the next two days we will finalise the price band,'' Spice Managing Director Dilip Modi said today, without disclosing his location or the amount the company may seek to raise from the sale. "We'll float the IPO before the close of June.''

Bangalore-based Spice plans to sell shares at Rs 48 ($1.17) each, valuing the company at about $750 million, the Edge Weekly magazine reported today, citing an unidentified person familiar with the plan. The company has the stock market regulator's permission to sell about 138 million shares.

Spice is seeking funds to grow as overseas rivals such as Vodafone Group Plc deepen their presence in the world's fastest-growing wireless market. India is adding almost six million new mobile-phone users on average each month as the cheapest call rates in the world of as low as 2 cents a minute lure customers.

At the price reported, the sale would fetch Rs 662 crore. Spice had planned to raise as much as $300 million selling as much as 20 per cent of its equity, it said in September 2006.

Modi declined to comment on today's Edge report. Spice, which provides mobile-phone services in two of the 23 zones that make up India's telecommunications industry, is majority controlled by the BK Modi group. The company has three million users.

Spice, which began operations in 1997, competes with local rivals Bharti Airtel, Hutchison Essar, Reliance Communications and Bharat Sanchar Nigam. Spice has applied for licenses to offer mobile-phone services in 20 additional zones and sought permission to provide national long-distance and overseas call services in the country.

Modi also declined to comment on media reports that Spice and larger rival Idea Cellular were in merger talks. Idea Cellular, controlled by billionaire Kumar Mangalam Birla, has networks in 11 zones in the country. The company sold first-time shares at Rs 75 each in February that rose as much as 26 per cent on their debut as investors sought to tap strong growth.

Mostly Mobile

The country will probably have 500 million telephone users by 2010, compared with 218 million at present. Almost 80 per cent of the customer base uses mobile phones and most new users are also likely to opt for wireless connections, according to the Cellular Operators Association of India.

Carriers such as Bharti and Hutchison Essar have lined up $15 billion in expansion plans in the next three years as they increase coverage in communication-starved rural areas, where telephone penetration is less than 6 per cent, compared with an average 35 per cent in large cities.

Reliance Communications is offering inexpensive handsets priced as low as $19 to woo customers in rural India. Villages and small towns are likely to contribute 150 million new users from the next 250 million mobile-phone service providers sign up, according to government estimates.

The monthly average revenue per user, a key financial measure, in rural areas is expected to be half the national average of Rs 281, according to a joint study by the Confederation of Indian Industry and telecommunications advisory company BDA Connect.

Carriers are reducing expansion costs by sharing passive infrastructure such as relay towers, generators and shelters because revenue per user is likely to be less in villages.

Reliance Communications has separated its telephone infrastructure into a separate unit and is planning to sell a minority stake in the company to investors.