Idea cellular ltd

Draft Red Herring Prospectus

Please read Section 60B of the Companies Act, 1956Dated December 5, 2006

(will become Prospectus on the date of filing with the Registrar of Companies)

100% Book Building Issue

Idea Cellular Limited

an Aditya Birla Group Company

(Incorporated as Birla Communications Limited on March 14, 1995 under the Companies Act, 1956 and granted a certificate of commencement of business dated August 11, 1995. Thename of the Company was subsequently changed to Birla AT&T Communications Limited pursuant to a fresh certificate of incorporation dated May 30, 1996. The name wassubsequently changed to Birla Tata AT&T Limited pursuant to a fresh certificate of incorporation dated November 6, 2001. The name of the Company was further changed to IdeaCellular Limited pursuant to a fresh certificate of incorporation dated May 1, 2002.) Pursuant to a certificate of registration dated October 22, 1996 our registered office was transferredfrom Mumbai to Gandhinagar. (For further details see

“Our History and Corporate Structure”

on page [

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] of this Draft Red Herring Prospectus).

Registered Office:

Suman Tower, Plot No. 18, Sector-11, Gandhinagar – 382011

Tel:

+91 79 6671 4000

Fax:

+ 91 79 2323 2251Corporate Office: 11/1 Sharada Center, Off Karve Road, Erandwane, Pune – 411004 Tel: +91 98500 03222 Fax: +91 98500 03999

Contact person:

A.J.S. Jhala

Email:

shs@ideacellular.com

Website:

www.ideacellular.com

PUBLIC ISSUE OF [

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] EQUITY SHARES OF Rs. 10 EACH FOR CASH AT A PRICE OF Rs. [

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] AGGREGATING Rs. 25,000 MILLION (HEREINAFTER REFERRED TO AS THE “ISSUE”). THE ISSUE IS COMPRISED OF A RESERVATION OF [

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] EQUITY SHARES OF Rs. 10 EACH FOR THE ELIGIBLEEMPLOYEES OF THE COMPANY (“EMPLOYEE RESERVATION PORTION”), AND A NET ISSUE TO THE PUBLIC OF [

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] EQUITY SHARES OF Rs. 10(HEREINAFTER REFERRED TO AS THE “NET ISSUE”). THERE SHALL ALSO BE A GREEN SHOE OPTION FOR ALLOCATING UP TO [

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] EQUITYSHARES OF Rs.10 EACH NOT EXCEEDING Rs. 3,750 MILLION, IN EXCESS OF THE EQUITY SHARES THAT ARE INCLUDED IN THE ISSUE. THEISSUE WITH THE GREEN SHOE OPTION AGGREGATES Rs. 28,750 MILLION.THE COMPANY IS CONSIDERING A PRE-IPO PLACEMENT, NOT TO EXCEED 15% OF THE ISSUE, TO CERTAIN INVESTORS PRIOR TO THEISSUE (“PRE-IPO PLACEMENT”). IF THE PRE-IPO PLACEMENT IS COMPLETED, THE NET ISSUE WOULD BE REDUCED TO THE EXTENT OFTHE PRE-IPO PLACEMENT.THE ISSUE WOULD CONSTITUTE [

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]% OF THE FULLY DILUTED POST ISSUE PAID-UP EQUITY CAPITAL OF THE COMPANY ASSUMING NOEXERCISE OF THE GREEN SHOE OPTION AND [

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]% ASSUMING THE GREEN SHOE OPTION IS EXERCISED IN FULL.PRICE BAND: Rs. [

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] TO Rs. [

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] PER EQUITY SHARE OF FACE VALUE Rs. 10 EACH.THE ISSUE PRICE IS [

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] TIMES THE FACE VALUE PER EQUITY SHARE AT THE LOWER END OF THE PRICE BAND AND [

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] TIMES THE FACEVALUE PER EQUITY SHARE AT THE HIGHER END OF THE PRICE BAND.

In case of revision in the Price Band, the Bidding/Issue Period shall be extended for three additional working days after such revision, subject to the Bidding/Issue Period not exceeding 10working days. Any revision in the Price Band, and the revised Bidding/Issue Period, if applicable, shall be widely disseminated by notification to the Bombay Stock Exchange Limited(“BSE”) and the National Stock Exchange of India Limited (“NSE”) and by issuing a press release and also by indicating the change on the websites of the Book Running Lead Managersand the terminals of the Syndicate.In terms of Rule 19(2)(b) of the Securities Contracts Regulation Rules, 1957, as amended from time to time (“SCRR”), with respect to the issue being less than 25% of post Issue capital,the Issue is being made through the 100% Book Building Process wherein at least 60% of the Net Issue to the public shall be allocated on a proportionate basis to Qualified InstitutionalBuyers (“QIBs”). 5% of the QIB Portion shall be available for allocation on a proportionate basis to Mutual Funds only, and the remainder of the QIB Portion shall be available for allocation on a proportionate basis to all QIBs, including Mutual Funds, subject to valid Bids being received at or above the Issue Price. Further, not less than 10% of the Net Issue to the public shall be available for allocation on a proportionate basis to Non Institutional Bidders and not less than 30% of the Net Issue to the public shall be available for allocation on a proportionate basis to Retail Individual Bidders, subject to valid Bids being received at or above the Issue Price. Further, [

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] Equity Shares shall be available for allocation on a proportionate basis to Eligible Employees, subject to valid Bids being received at or above the Issue Price.

RISK IN RELATION TO FIRST ISSUE

This being the first public issue of Equity Shares, there has been no formal market for our Equity Shares. The face value of our Equity Shares is Rs. 10 per Equity Shareand the Floor Price is [

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] times of face value and the Cap Price is [

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] times of face value. The Issue Price (as determined by the Company, in consultation with the Book Running Lead Managers, on the basis of assessment of market demand for our Equity Shares issued by way of book building) should not be taken to be indicative of themarket price of our Equity Shares after the Equity Shares are listed. No assurance can be given regarding an active and/or sustained trading in our Equity Shares or regarding the price at which our Equity Shares will be traded after listing.The Company has not opted for IPO grading for this Issue.

GENERAL RISKS

Investments in equity and equity-related securities involve a degree of risk and investors should not invest any funds in this Issue unless they can afford to take the risk of losing their investment. Investors are advised to read the risk factors carefully before taking an investment decision in this Issue. For taking an investment decision,investors must rely on their own examination of the Company and the Issue including the risks involved. The Equity Shares issued/offered in the Issue have not beenrecommended or approved by the Securities and Exchange Board of India (“SEBI”), nor does SEBI guarantee the accuracy or adequacy of the contents of this Draft RedHerring Prospectus. Specific attention of the investors is invited to the summarized and detailed statements in “Risk Factors” beginning on page [

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] of this Draft RedHerring Prospectus.

COMPANY’S ABSOLUTE RESPONSIBILITY

We, having made all reasonable inquiries, accept responsibility for and confirm that this Draft Red Herring Prospectus contains all information with regard to us and theIssue, which is material in the context of the Issue, that the information contained in this Draft Red Herring Prospectus is true and correct in all material aspects and is notmisleading in any material respect, that the opinions and intentions expressed herein are honestly held and that there are no other facts, the omission of which makes thisDraft Red Herring Prospectus as a whole or any of such information or the expression of any such opinions or intentions misleading in any material respect.

LISTING

The Equity Shares offered through this Draft Red Herring Prospectus are proposed to be listed on the BSE and NSE. We have received in-principle approvals from theseStock Exchanges for the listing of our Equity Shares pursuant to letters dated [

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] and [

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], respectively. For the purposes of the Issue, the Designated Stock Exchange is NSE.

BOOK RUNNING LEAD MANAGERS

SENIOR CO-BOOK RUNNING LEAD MANAGERSREGISTRAR TO THEISSUE

JM MORGAN STANLEYPRIVATE LIMITED

141, Maker Chambers III, Nariman Point,Mumbai 400 021, IndiaTel.: +91 22 6630 3030Fax.: +91 22 2204 7185Email:ideaipo@jmmorganstanley.comWebsite:www.jmmorganstanley.comContact person: Mayank Jain

DSP MERRILLLYNCH LIMITED

Mafatlal Center,10th Floor, Nariman PointMumbai 400 021,IndiaTel: +91 22 2262 1071Fax: +91 22 2262 1187Email: idea_ipo@ml.comWebsite: www.dspml.comContact person: N S Shekhar

CITIGROUP GLOBALMARKETS INDIAPRIVATE LIMITED

Bakhtawar, 12th Floor, Nariman PointMumbai 400 021,IndiaTel: + 91 22 5631 9999Fax: +91 22 5631 9803Email: idea.ipo@citigroup.comWebsite:www.citibank.co.inContact person: Pankaj Jain

UBS SECURITIES INDIAPRIVATE LIMITED

2/F, Hoechst House Nariman Point,Mumbai 400 021,India.Tel: + 91 22 2286 2005Fax: +91 22 2281 4676Email: idea@ubs.comWebsite: www.ibb.ubs.com/Corporates/indian ipo/Contact person: Avi Mehta

INTIME SPECTRUMREGISTRY LIMITED

C 13 Pannalal Silk MillsCompound, LBS Marg, Bhandup,Mumbai 400 078,IndiaTel: +91 22 2596 0320Fax: +91 22 2594 0329Email: ideacell-ipo@intimespectrum.comWebsite:www.intimespectrum.comContact person: Salim Shaikh

BID/ISSUE PROGRAM

BID/ISSUE OPENS ON:

[

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BID/ISSUE CLOSESON:

[

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CONTENTSCLAUSE PAGE

DEFINITIONS AND ABBREVIATIONS...............................................................................................2CERTAIN CONVENTIONS; USE OF MARKET DATA....................................................................15FORWARD-LOOKING STATEMENTS..............................................................................................16RISK FACTORS....................................................................................................................................17SUMMARY - OUR BUSINESS............................................................................................................35SUMMARY CONSOLIDATED FINANCIAL INFORMATION.........................................................37THE ISSUE............................................................................................................................................41GREEN SHOE OPTION........................................................................................................................42GENERAL INFORMATION.................................................................................................................46CAPITAL STRUCTURE.......................................................................................................................58OBJECTS OF THE ISSUE....................................................................................................................67BASIS FOR THE ISSUE PRICE...........................................................................................................75STATEMENT OF TAX BENEFITS.....................................................................................................78OVERVIEW OF THE MOBILE TELECOMMUNICATIONS INDUSTRY IN INDIA......................85INDIAN TELECOMMUNICATIONS INDUSTRY REGULATION...................................................98BUSINESS...........................................................................................................................................104OUR HISTORY AND CORPORATE STRUCTURE.........................................................................132SUBSIDIARIES...................................................................................................................................137MANAGEMENT.................................................................................................................................143THE PROMOTER GROUP.................................................................................................................164OUR PROMOTERS.............................................................................................................................165DIVIDEND POLICY...........................................................................................................................190FINANCIAL STATEMENTS..............................................................................................................191MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONS.............................................................................................................274DESCRIPTION OF CERTAIN INDEBTEDNESS.............................................................................303OUTSTANDING LITIGATION AND OTHER MATERIAL DEVELOPMENTS............................312LICENSING ARRANGEMENTS.......................................................................................................402OTHER REGULATORY AND STATUTORY DISCLOSURES.......................................................410TERMS OF THE ISSUE......................................................................................................................419ISSUE STRUCTURE...........................................................................................................................422ISSUE PROCEDURE..........................................................................................................................425MAIN PROVISIONS OF THE ARTICLES OF ASSOCIATION.......................................................456RESTRICTIONS ON FOREIGN OWNERSHIP OF INDIAN SECURITIES....................................489MATERIAL CONTRACTS AND DOCUMENTS FOR INSPECTIONS..........................................491DECLARATION..................................................................................................................................494

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DEFINITIONS AND ABBREVIATIONSA. Company Related Definitions and AbbreviationsDefinition/Abbreviation Description/Full form

Additional Directors Director appointed pursuant to section 260 of the CompaniesAct, 1956, in place of a regular director on the board of acompanyAsian Asian Telephone Services LimitedAWS Group Companies including the AT&T Wireless Services Inc. thatconstitute part of the AWS GroupBhagalaxmi Bhagalaxmi Investments Private LimitedBTA Cellcom BTA Cellcom LimitedCFO Chief Financial Officer of the CompanyEscotel Escotel Mobile Communications Limited, now known as ‘IdeaMobile Communications Limited’Escorts Escorts Telecommunications Limited, now known as ‘IdeaTelecommunications Limited’Established Circles The telecom Circles in which the Company had commercialoperations as at March 31, 2006, namely: the Andhra Pradesh,Delhi, Gujarat, Haryana, Kerala, Madhya Pradesh, Maharashtraand Uttar Pradesh (West) Circles“the Group” Unless the context otherwise requires, refers to Idea Cellular Limited and its Subsidiaries“Idea Cellular” or “the Company” or “our Company” or “Idea Cellular Limited” or “we” or “us” and “our” or “ICL”Idea Cellular Limited, a public limited company incorporatedunder the Companies Act, 1956IMCL Idea Mobile Communications LimitedITL Idea Telecommunications LimitedLicense Applications Applications made by us to the DoT for the grant to us of UASLicenses in the Circles of Tamil Nadu (including Chennai),Kolkata, Karnataka, Punjab, West Bengal (and the Andamanand Nicobar Islands), Orissa, Assam, North East, Jammu andKashmir Letter of Intent Circles The Mumbai and Bihar Circles. We have received a letter of intent from the DoT for a new UAS License for the MumbaiCircle and, through Aditya Birla Telecom Limited, a letter of intent for a new UAS License for the Bihar Circle. ABNL has, pursuant to a letter dated November 22, 2006, agreed to transfer its entire shareholding in Aditya Birla Telecom Limited to usfor an aggregate consideration of Rs. 100 millionManaging Director A director who, by virtue of an agreement with the company or a resolution passed by the company in general meeting or by its board of directors, or by virtue of its memorandum or articles of association, is entrusted with substantial powers of management