Spice Communications Limited has informed that: The Board of Directors of the Company at its meeting held on June 25, 2008 have considered and: (1) Noted the entering into of a Share Purchase Agreement between MCorpGlobal Communication Private Limited and Idea Cellular Limited for sale of 281,489,350 equity shares of Rs 10/- each of the Company by MCorpGlobal Communication Private Limited to Idea Cellular Limited representing 40.8% of the total paid up equity capital of the Company at a price of Rs. 77.30 per equity share, and (2) Approved merger of the Company with Idea Cellular Limited based on an exchange ratio of 49 Equity Shares of Idea Cellular Limited for every 100 Equity Shares of the Company held by the shareholders.

Idea has agreed to buy the Modis' 28.14 crore shares for Rs 77.30 each, totalling Rs 2,176 crore. In addition, it will shell out Rs 544 crore, or over Rs 19 a share, to the Modis as a non-compete fee. This is under the 25% limit (with reference to the open offer price to non-promoter investors) prescribed by Sebi for any such payment.

The 14.99% preferential allotment to TMI will ensure that Idea, despite being the purchaser, ends up as a net gainer in the transaction. The net income for Idea, after making payment to the Modis, will be Rs 4,574 crore.

The Idea-TM combine will launch the open offer at Rs 77.30 jointly with TMI, which now holds 39.2%in Spice. At this stage it is not clear who will pick up how much. Idea will earn Rs 7,294 crore by selling 46.47 crore preferential shares to TMI for Rs 156.96 apiece.

According to the merger formula, Spice shareholders will get 49 Idea shares for every 100 shares they held. The payment to the Modis is being funded through internal accruals. After completion of the deal, which is expected to be done in next six months, Idea's equity base will be expanded due to issue of fresh shares to TMI, and also because of the share swap.

On Wednesday, Idea scrip closed at Rs 102.05, up 2.9% while Spice scrip touched an all-time high of Rs 73.40, before closing at Rs 72.35, a 33% gain over the previous day's close.

Aditya Birla Group firm Idea Cellular on Wednesday said it has acquired about 41 per cent stake in Spice Communications through open market and block trade transactions.

Idea Cellular has acquired 20 lakh equity shares, representing 0.29 per cent in Spice Communications at an average market price of Rs 74.81 each through open market transactions, the company said in a filing to the Bombay Stock Exchange.

Further, Idea Cellular through a block trade has acquired over 28.14 crore equity shares, representing 40.80 per cent, at a price of Rs 77.30 per piece, it added.

However, acquisition of these shares has not been completed and is held in separate escrow accounts. The acquirers of these shares would get the shares after fulfilling all its obligations under the SEBI Regulations, the filing added.

Earlier on June 25, Idea Cellular, the fifth-largest mobile operator in terms of subscribers, had said it would acquire 40.8 per cent stake in B K Modi-owned Spice group for Rs 2,716 crore.

The Aditya Birla group firm has also made an open offer to the shareholders of Spice Communications for acquiring additional 20 per cent stake in the telecom services provider for about Rs 1,066.63 crore.

The open offer would start on August 22, and would close on September 11.

The Idea-Spice deal would catapult Idea Cellular's market share to 11.1 per cent and more importantly would get the crucial spectrum on 900 Mhz band.

Shares of Idea Cellular were trading at Rs 87.35, up 1.93 per cent, while Spice Communications was quoted up 0.48 per cent at Rs 73.90.

TAGS:

Jetairrrrrrrrrr

et Airways/Air Sahara merger & Kingfisher Airlines/Air Deccan

Presentation Transcript

1. Jet Airways and Air SaharaKingfisher Airlines and Air Deccan

2. Reducing the over-capacity existing in the market Stabilizing prices, Increasing yields and Bringing down costs. The era of cheap fares might also come to an end.

3. Jet Airways Owned by London based Billionaire Naresh Goyal Started commercial airlines operations in 1993 Second largest airline after Air India Fleet consists of 92 aircrafts(as on June 2010)Air Sahara It was a part of Sahara India Pariwar business conglomerate. Began operations in December 1993 Was rebranded as Air Sahara in 2000; earlier known as Sahara airlines In 2004 it became an international carrier with the start of flights from Chennai to Colombo.

4. In Jan 2006 Jet announced to buy Air Sahara for US $500 million( Rs 2300 crore). But deal fell apart in June after Jet failed to get the necessary regulatory approval. Both companies file suit against each other Jet filed a petition in the court stating that Air Sahara had not fulfilled conditions agreed upon - transfer of infrastructure facilities like parking bays, arrival and departure slots. Air Sahara filed a

petition for blocking Jet Airways from withdrawing money deposited in the escrow account created for the merger Escrow account gets sealed. Finally – no deal

5. In April 2007 a second attempt made Deal was closed in at $14.4 billion (Rs 1450 crores) including Rs 500 crore that had already been paid.(only equity component) Jet Airways was to transfer Rs 400 crore to Air Sahara immediately.The balance of Rs 550 crore is payable in four interest free annual equal instalments Air Sahara renamed JetLite

6. The deal included only the transfer of assets, the liabilities of Air Sahara were not transferred. The deal gives Jet with access to more international destinations and greater infrastructure including more parking bays and hangers at domestic airports. Domestic market share of 32%. The deal also helps the Sahara Group exit the airline business and concentrate on its other businesses-financial services, publishing and real estate.

7. JetLite will have a simple business plan and business model Catering to price sensitive travellers and first time flyers This segment of the market is experiencing exceptional growth and is estimated to grow at +25% pa. The significant advantage JetLite will enjoy vis a vis competitors in this segment will be ◦ the ability to leverage the lower costs of services through group consolidation, group purchasing and better utilization of existing infrastructure including manpower productivity. ◦ Higher level of frills than existing no frills carriers ◦ Higher level of reliability from the customer’s point of view on account of Jet Airways’strong network

8. Air Deccan airlines merged with Kingfisher Airlines and decided to operate as a single entity from April, 2008. It would be known by a different name-Kingfisher Aviation. The merger is based on recommendations of Accenture, the global consulting firm. KPMG was asked to do the valuation and the swap ratio was decided accordingly. The merger came through on as Vijay Mallya from Kingfisher airlines bought 26% of the stake in Air Deccan. The unification of the two carriers had to be sanctioned not only by the two panels, but also by the institutional investors, independent directors, and other shareholders. After the merger, the company has a combined fleet of 71 aircrafts, connects 70 destinations and operates 537 flights in a day. The combined entity has a market share of 33%.

9. The charter service of the respective airlines would be hived off and operate as a separate entity. Post merger, KingFisher would operate as a single largest (private) airline in the sub-continent. Operational synergies ◦ engineering, ◦ inventory management and ◦ ground handling services, ◦ maintenance and overhaul The management and staff of both the airlines would be integrated. Spend less on training and employees. Costs would also reduce which is associated with maintenance of aircraft. The savings in cost would be lower by about 4-5% (Rs 300 crores) (Business Standard, June 3, 2007, p- 4) Devising a more optimal routing strategy it could help in rationalizing the fares.

10. Kingfisher will focus more on the international routes while Air Deccan will give it a wider domestic reach Air Deccan plans to continue as a low cost carrier while Kingfisher will function as a full-service carrier The Airbus aircraft serve metro routes while ATR are utilized for Tier II and III cites and also for small airports Company plans to revisit their fleet plan in coordination with each other to rationalize the fleet structure The company has already placed orders from the European aircraft major, Airbus

Industries for about 90 aircrafts. ◦ These include five of the largest aircraft-A380, the first of which is slated to be delivered to Kingfisher by 2011.

11. Concentration as shown by the Herfindahl-Hirschman Index (HHI) is increasing on relevant markets, post merger. ◦ HHI, is a measure of the size of firms in relation to the industry and an indicator of the amount of competition among them In terms of slots, post merger, Jet and Kingfisher are controlling a major share. Indian is losing out to these two players. Large number of airlines flying on selected routes. Control of major slots, especially in the peak period , by Jet and Kingfisher. Consumer therefore has limited choice in the peak period. High degree of price parallelism –especially between Jet and Kingfisher –may lead to price collusion given the dominance of these two airlines on selected routes. May also lead to overpricing.

12. Foreign Travel Promotion by other players Entry of New Players Aircraft Purchase by Airlines Infrastructure Constraints and Airport development Non-metro airports Government Policy Open Sky Policy and liberalized set up Foreign Direct Investment Technical Issues Cargo Hub Lack of MRO Facilities Shortage of skilled personnel Peak Hour Airport Fees

13. Limited Air Infrastructure ◦ Modernisation of airports ◦ Creation of secondary airports ◦ Seamless ATC (air traffic control) system Cost Structure of an Airline ◦ Sensitive about the cost of aviation turbine fuel (ATF) ◦ Air travel is expected to become more costly as per the directions given by the civil aviation ministry Innovation Financing MRO Facilities ◦ Maintenance, repair and overhaul facilities lacking in India