While sources within Idea confirmed talks would continue, they said a buyout would be preferred to a merger.
Even as the buzz about the impending merger between Spice Telecom and Idea Cellular grew louder, the two telcos vehemently denied the rumours.
BK Modi, who owns Spice Telecom told FE, We have got the approval for an IPO. What is the justification behind merging with Idea Cellular Idea Cellular managing director Sanjeev Aga said, We do not wish to comment on speculative reports. The Idea Cellular stock was down 2.27% to close at Rs 122.90 on the BSE on Wednesday.
Industry sources claim a buyout or a merger would be synergistic since the circles the two companies operate in are complementary. Spice Telcom, present in the Punjab and Karnataka circles, would give a fillip to Ideas aim to gain a pan-Indian presence. Idea has a subscriber base of 14.5 million, whereas Spice is a marginal player with just 2.8 million subscribers.
A merger would give Telekom Malaysia, which currently holds 49% in Spice, a greater presence in India, and allow Idea to capitalise on the foreign partners strength and deep pockets to tread an ambitious growth path.
Interestingly, Idea which has recently concluded a rights issue and an IPO, successfully raising as much as Rs 2819 crore, has chalked out aggressive capex plans and has repeatedly claimed it would be open to acquisitions and consolidating its presence further.
A merger will allow them to emerge as strong regional players and catapult the merged entity to the fifth position in the Indian cellular telephone market, said Sumit Modi, analyst, Emkay Share and Stockbrokers.