Aircel May Be A Rs 1,200 Cr Idea!

Mumbai | Updated: May 28 2004, 05:30am hrs
Telecom major Idea Cellular is in an advanced stage of negotiations with C Sivasankaran-promoted Aircel to acquire the latters operations for an estimated Rs 1,200 crore. Aircel operates in the Chennai metro circle and the Tamil Nadu A category circle.

Sources close to the development said the deal will be a combination of cash and share swap where shares of Idea Cellular will be given to Mr Sivasankaran. Both these circles are said to be well-run operations; the Chennai circle is debt-free while Tamil Nadu is said to have a very small debt component. Both these circles together generated a revenue of Rs 350 crore for the previous financial year, according to figures released by the Cellular Operators Association of India (COAI).

It is gathered that both the parties have been in hectic negotiations over the last couple of weeks. Both Idea Cellular and Mr Sivasankaran are very keen on doing the deal, said a source familiar with the development. While it was said at one stage that Bharti Tele-Ventures was also in the race, it is almost certain that they are not in it today. Senior officials at Idea Cellular, when contacted, declined to comment.

It is still not very clear what Mr Sivasankarans role in the new scenario will be. Sources said he could hold a senior position in the newly acquired entity. Aircels operations in Tamil Nadu today boasts of a subscriber base of 7.46 lakh while the Chennai operations has 3.27 lakh subscribers. The Tamil Nadu circle was among the first in the country to offer free incoming calls long before the Calling Party Pays (CPP) regime came into force from May this year. The Chennai operations were acquired from RPG Cellular which held close to 80 per cent stake and Vodafone which held the balance 20 per cent. The average revenue per user (ARPU), a key indicator of an operators performance, stands at Rs 370 per month for Aircels Tamil Nadu operations for the period April 2003-March 2004. The corresponding figure for Chennai is Rs 444 per month. Both circles are said to be operating at about 40 per cent EBITDA (earnings before interest, tax, depreciation and amortisation).

Analysts point out that the acquisition is important for Idea Cellular since it strengthens its presence in Southern India. The company has a presence in Andhra Pradesh and there is a lot of traffic between Tamil Nadu and Andhra Pradesh. In that context, this acquisition will help in generating more revenues for Idea Cellular apart from increasing its footprint, they said. It may be recalled that Idea Cellular acquired the Escorts-promoted Escotel Communications and its overseas partner First Pacifics stake in a 100 per cent buyout. Escotel operates cellular services in Uttar Pradesh (West), Haryana and Kerala.