Spice Tele to ramp up with $2.5 bn

Spice Telecom is planning to raise $650 million through two public offerings for funding its $2.5-billion pan-India expansion in the GSM mobile space.

The joint venture company, in which MCorp Global (a BK Modi company) owns a 51 per cent stake, with the rest owned by Telekom Malaysia, has applied for a unified access service licence in 21 circles across the country.

Spice has announced it will invest $2.5 billion to build up its network over the next two-three years, making it the seventh pan-Indian mobile player. The others are Bharti, Hutch, BSNL, Idea, Tata, and Reliance Communications.

"We are coming out with the first public offer, to raise $250-300 million, between October and December this year. The second issue will be for about $350 million, and is expected by December 2008, depending on the licence we get and our market valuation," said Dilip Modi, vice-chairman and president, MCorp Global.

The advisers for the IPOs are Enam Securities, Deutsche Bank, and JP Morgan.

The operator is looking at dilution of up to 20 per cent of its equity, but will maintain the 51:49 ratio with Telekom Malaysia.

Of the total investment, $500 million will go towards the expansion of the Punjab and Karnataka circles, where it has a combined subscriber base of 2.1 million (their market share in the GSM mobile space is 2.5 per cent). The rest of the money will be invested in the proposed new circles.

Modi said the valuation of the company would be in the range of $1-1.5 billion, and was expected to go up to $4 billion once the expansion plans fructified. In comparison, Hutch-Essar has a valuation of $10-12 billion, with a subscriber base of 19 million.

Despite the investments, Spice is looking at profits after tax, and hopes to increase its EDIBTA to Rs 324 crore this financial year from Rs 224 crore in the last financial year, and revenues to Rs 1,000 cr from Rs 734 cr.

It plans to initially roll out its new services in the B and C circles. "The semi-urban and the rural market is under-served, and we want to start our expansion there," Modi added.