One of the early starters in the GSM mobile space but restricted to regional operations, the B K Modi-controlled Spice Communications on Wednesday was acquired by Idea Cellular of the AV Birla group for Rs 2,716 crore. The acquisition price is almost Rs 665 crore more than the market price. The closing price of the share was Rs 72.15 on the Bombay Stock Exchange on Wednesday. The Spice Communications scrip surged by 33% after the announcement. The company has a market capitalisation of Rs 4,9991 crore.

Idea Cellular?s scrip gained a 2.09% on the BSE, to close at Rs 102.05.

The development signifies that in the booming telecom sector there?s no room for companies with limited operations, restricted to a few circles. Spice operates in Punjab and Karnataka circles.

Idea has acquired the Modi family?s stake of 40.8% in Spice at Rs 77.30 a share, much above the expected Rs 62 a share. Idea said it would merge Spice with itself through a share swap where Spice shareholders would get 49 Idea shares for every 100 Spice shares held. It will also pay an additional Rs 544 crore to Modi as non-compete fee.

The acquisition of Spice would give Idea straightaway two existing circles of Punjab and Karnataka with a subscriber base of 4.4 million. Currently, Idea is present in 11 circles and has a user base of over 26 million. It has licences for the remaining circles.

Further, Idea along with Telekom Malaysia International (TMI), which holds 39.5% stake in Spice, would make an open offer for additional 20% stake in Spice at the same price at which Idea has bought the Modi family?s share.

?Idea will make a preferential allotment to TMI of 464.73 million equity shares at a price of Rs 156.96 a share representing 14.99% of Idea?s equity capital post allotment,? an Idea statement said.

TMI will also pay Rs 7,500 crore to Idea Cellular for the additional stake in the company, with which its stake in the company would become little less than 20%. With this transaction, there would be a net inflow of Rs 4,500 crore in Idea cellular.

Speaking to the media at the Aditya Birla Group?s headquarters in Mumbai, chairman Kumar Mangalam Birla said that the deal marks a major inflection point for Idea. ?It ups the quality of Idea?s operations and balance sheet. This will take us into the big league of telecom players. Even before this transaction, we had become the number 5 player from number 6. Now, we have become an even stronger number 5 player?.

?We are also launching four new circles in the next four months. We will then have a pan India presence, except for states like West Bengal and J&K,?? Birla added.

Spice Communications would be delisted once the open offer is completed, Sanjeev Aga, MD, Idea, said, adding that the company is looking at a six-month timeline for de-listing.