Bharti buys Spice, flexes mobile muscle

By Staff and reports

NEW DELHI, India (CNN) -- Bharti has purchased Spice Cell for nearly $100 million, turning into an even bigger force in India's mobile sweepstakes.

Analysts say the Spice Cell acquisition helps Bharti secure a foothold in India's lucrative metropolitan markets.

Bharti is also emerging as a leader in the race for new mobile phone licenses being auctioned by the government. Final bids are scheduled to take place on Thursday.

All-cash deal

Akhil Gupta, joint managing director of Bharti Televentures, said the group bought 100 percent equity in Spice Cell in an all-cash deal.

"We are not giving out the exact details, but I can say we paid between $90 million and $100 million for (Spice Cell), including debt," Bharti group managing director Sunil Mittal told reporters on Monday.

Spice Cell, 51 percent owned by ModiCorp, a holding company of India's B.K. Modi business family, and 49 percent owned by Hong Kong's Distacom, was a mobile operator in the eastern city of Calcutta.

Bharti, a New Delhi-based unlisted group, is one of the largest and most aggressive telecom groups which operates mobile networks in New Delhi and the states of Karnataka, Andhra Pradesh and Himachal Pradesh.

The group also runs a fixed-line network in Madhya Pradesh.

Bharti has raised over $1 billion during the past year to fund its ambitious expansion plans that include becoming a large pan-India mobile player and making forays into fixed-line telephony and the long-distance telephony businesses.

Its acquisition of Spice Cell comes close on the heels of the merger between mobile phone giants Birla-AT&T-Tata and BPL Communications last month to create India's largest mobile company.

On top in mobile bidding

The Indian government is auctioning licenses for the fourth cellular operator slot in the country's 21 telecom zones.

The Bharti group is all set to win a license to launch its cellular service in Bombay from the government by the end of next month.

On Monday, it outbid Reliable Internet Services, a company belonging to influential Indian conglomerate, the Reliance Group.

The Bombay license is among seven licenses Bharti looks set to win in the auctions for India's 21 telecom zones.

These zones have two private operators each now while the slot for the third has been reserved for state-run companies BNML and MTNL.

"We're pleased with the outcome of the bidding for the fourth license. Now, we're focusing on providing services in these areas," Bharti's Mittal told the Economic Times.

"We are also waiting for the outcome of the third round of bidding,"

The third and final round of bidding will be held on Thursday, July 19.

India's mobile market has surged 89 percent in the last year to reach a total of 3.7 million subscribers by the end of April 2001.

The Cellular Operators' Association of India (COAI) said the growth in usage stems from a more favorable licensing environment that in turn encouraged a fall in airtime rates.

Cellular rates in India have fallen by 50 to 75 percent over the last two years to hit a current rate of about $0.04 per minute on average.

Industry watchers say rates will drop even more when additional competition is introduced after the August cellular license auctions.

Reuters contributed to this report.