|
|
Birlas Buy Tata’s Stake in “Idea Cellular”
Invite a Friend
Free Email Alerts
|
|
On April 10, 2006, the AV Birla Group (Birlas) announced that it would acquire the Tata Group’s (Tata’s) 48.14% stake in Idea Cellular (Idea). This marked the end of a tussle, which was going on for many months, between India’s two big industrial houses over the ownership stake of Idea, their telecom joint venture. The Birlas said that they would pay Rs 44.06 billion (at Rs 40.51 a share) in this deal. While 15% of the 48.14% stake would be acquired by Aditya Birla Nuvo, a company in-charge of the Birlas new business initiatives, the remaining stake would be acquired by Birla TMT holdings Private Ltd., an AV Birla family owned company.
Idea was set up in 1995, where in the Birlas, Tata’s and AT&T Wireless, USA, held one-third equity in the new company. |
Idea was a result of the merged GSM businesses of these promoters. AT&T Wireless’s stake in Idea became part of Cingular Wireless (Cingular) when AT&T Wireless merged with Cingular in October 2004. Cingular, a joint venture between SBC Communications and Bell South, was one of the largest wireless carriers in the US. In December 2004, Cingular decided to sell its 32.9% stake in Idea. In July 2005, the Tata’s and Birlas announced that they would buy out Cingular’s stake (16.45% each) for Rs 13 billion.
However, after the buyout of Cingular’s stake in Idea, differences cropped up between the Birlas and Tata’s. The Tata’s simultaneously held a 100% stake in their subsidiary, Tata Teleservices Limited (Tata Tele), a CDMA-based mobile service provider. This dual holding by the Tata’s, in Tata Tele and Idea, was the main reason for the delay in Idea being granted a license to operate in Mumbai. As per the Department of Telecommunications (DOT) license norms, one promoter could not have more than 10% stake in two companies operating in the same circle. Tata Tele was already operating in the Mumbai circle, when Idea had filed for its license.
The Birlas complained to the DOT and sought its intervention on this issue. The Tata’s maintained that they would exit Idea but only after they got a good price. The Tata Group chairman, Ratan Tata reiterated this point when he said, “We have always indicated that we shall dilute our stake in Idea at the right time and right price.”
1
|
|
Contd... |
|
|
1
“Maxis, Tata join hands to share Idea pie,” http://economictimes.indiatimes.com/articleshow/1482324.cms, April 08, 2006. |
|
To download this micro case study (No. MCBS0003 ) click on the
button below, and select the case from the list of
available micro cases:
More Micro Case Studies
Microsoft’s "People-Ready" Campaign - Targeting IBM ?
Google and the 'Click Fraud' Menace
Real Madrid’s ‘Galacticos’ Strategy: Losing Steam?
Bird Flu In India
The Death Of Aibo
The ‘Le Clemenceau’ Controversy
BPO’s Tap into Rural India’s Potential
Online Advertising In India - The MSN India And NDTV Media Tie-Up
The Pixar Buy - Disney’s Creative Mojo?
Labor Unrest At Toyota India
Coca-Cola Faces Another University Ban
|
More Classifications...