India has become a hotbed of telecom mergers and acquisitions in the last decade.

Foreign investors and telecom majors look at India as one of the fastest growing telecom markets in the world. Sweeping reforms introduced by successive Governments over the last decade have dramatically changed the face of the telecommunication industry. The mobile sector has achieved a teledensity of 14% by July 2006 which has been aided by a bouquet of factors like aggressive foreign investment, regulatory support, lower tariffs and falling network cost and handset prices. M&A have also been driven by the development of new telecommunication technologies. The deregulation of the industry tempts telecom firms (telcos) to provide bundled products and services, especially with the ongoing convergence of the telecom and cable industries. The acquisition of additional products and services has thus become a profitable move for telecom providers.

REGULATORY FRAMEWORK
M&A in telecom Industry are subject to various statutory guidelines and Industry specific provisions e.g. Companies Act, 1956; Income Tax Act, 1961; Competition Act, 2002; MRTP Act; Indian Telegraph Act; FEMA Act; FEMA regulations; SEBI Takeover regulation; etc. We will cover some of these regulations hereunder which are unique to the telecom industry.

TRAI Recommendations
Telecom Regulatory Authority of India (TRAI) is of the view that while on one hand mergers encourage efficiencies of scope and scale and hence are desirable, care has to be taken that monopolies do not emerge as a consequence. TRAI had issued its recommendation to DoT in January 2004 regarding intra circle Mergers & Acquisitions which were accepted by DoT and stated below.

DoT Guidelines
Department of Telecommunications (DoT) can be credited with issuing a series of liberalis-ing initiatives in telecom sector which has led to phenomenal growth of the Industry. Based on recommendations of TRAI, DoT issued guidelines on merger of licences in February 2004. The important provisions are state below:
Prior
The

approval of the Department of Telecommunications will be necessary for merger of the licence.
findings of the Department of Telecommunications would normally be given in a period of about four weeks from the date of submission of application.

l l

Merger of licences shall be restricted to the same service area. There should be minimum 3 operators in a service area for that service, consequent upon such merger.

Any merger, acquisition or restructuring, leading to a monopoly market situation in the given service area, shall not be permit-ted. Monopoly market situation is defined as market share of 67% or above of total subscriber base within a given service area, as on the last day of previous month. For this purpose, the market will be classified as fixed and mobile separately. The category of fixed subscribers shall include wire-line subscribers and fixed wireless subscribers. Consequent upon the merger of licences, the merged entity shall be entitled to the total amount of spectrum held by the merging entities, subject to the condition that after merger, the amount of spectrum shall not exceed 15 MHz per operator per service area for Metros and category A service areas, and 12.4 MHz per operator per service area in category B and category C service areas.

In case the merged entity becomes a Significant Market Power (SMP) post merger, then the extant rules & regulations applicable to SMPs would also apply to the merged entity. TRAI has already classified SMP as an operator having market share greater or equal to 30% of the relevant market.

In addition to M&A guidelines, DoT has also issued guidelines on foreign equity participations and management control of telecom companies. The National Telecom Policy, 1994 (NTP 94) provided guidelines on foreign equity participation and as revised by NTP 99 permitted maximum 49% cap on foreign investment. Recently by its order no. - 842-585/2005-VAS/9 dated 1 st February, 2006 DoT has enhanced the FDI limit in telecom sector to 74%. The key provisions of these guidelines are as follows:
The

total composite foreign holding including but not limited to investments by Foreign Institutional Investors (FIIs), Non-resident Indians (NRIs), Foreign Currency Convertible Bonds (FCCBs), American Depository Receipts (ADRs), Global Depository Receipts (GDRs), convertible preference shares, proportionate foreign investment in Indian promoters/investment companies including their holding companies, etc., referred as FDI, should not exceed 74%. The 74% investment can be made directly or indirectly in the operating company or through a holding company and the remaining 26 per cent will be owned by resident Indian citizens or an Indian Company (i.e. foreign direct investment does not exceed 49 percent and the management is with the Indian owners). It is also clarified that proportionate foreign component of such an Indian Company will also be counted towards the ceiling of 74%. However, foreign component in the total holding of Indian public sector banks and Indian public sector financial institutions will be treated as Indian holding. l
l

The licencee will be required to disclose the status of such foreign holding and certify that the foreign investment is within the ceiling of 74% on a half yearly basis.
The majority Directors on the Board including Chairman, Managing Director and Chief Executive Officer (CEO) shall be resident Indian citizens. The appointment to these positions from among resident Indian citizens shall be made in consultation with serious Indian investors.

The merger of Indian companies may be permitted as long as competition is not compromised as defined below:

No single company/legal person, either directly or through its associates, shall have substantial equity holding in more than one licencee Company in the same service area for the Access Services namely; Basic, Cellular and Unified Access Service. Substantial equity herein will mean equity of 10% or more. A promoter company/Legal person cannot have stakes in more than one LICENCEE Company for the same service area Some exceptions have been provided to this guideline.

The Licencee shall also ensure that any change in shareholding shall be subject to all necessary statutory requirements.
As per recent news reports, the Government wants to arm itself with power to block FDI in case the investment from companies or countries deemed undesirable, even if it is within the approved limit. This is a positive step due to increasing security concern India is facing but has led to apprehension that the new law will be used to block investment from certain parts of the world.

FEMA Guidelines
The foreign exchange laws relating to issuance and allotment of shares to foreign entities are contained in The Foreign Exchange Management (Transfer or Issue of Security by a person residing out of India) Regulation, 2000 issued by RBI vide GSR no. 406(E) dated 3rd May, 2000. These regulations provide general guidelines on issuance of shares or securities by an Indian entity to a person residing outside India or recording in its books any transfer of security from or to such person.
RBI has issued detailed guidelines on foreign investment in India vide Foreign Direct Investment Scheme contained in Schedule 1 of said regulation. As per the FDI scheme, investment in telecom sector by foreign investors is permitted under the automatic route within the overall sectoral cap of 74% without RBI approval. The salient features of FDI scheme as applicable to telecom sector is as follows:
Industries

which do not fall within the ambit of Annexure A can issue shares under automatic route to foreign companies (Para 2). Since telecom sector is not listed in Annexure A hence foreign investment can be made in telecom sector upto 74% cap without prior approval of RBI.

In case, investment by foreign investor(s) in an Indian telco is likely to exceed sectoral cap of 74%, then they should seek approval of (FIPB) Foreign Investment Proposal Board. (Para 3) FDI scheme permits automatic approval of transfer of shares from one foreign shareholder to another, so long as the transfer is in compliance of FDI scheme and the regulation. (Regulation 9)

However, if the shares are being transferred by a person residing outside India to a person resident in India, it shall be subject to adherence to pricing guidelines, documentation and reporting requirements of RBI. Application seeking RBI approval is to be made in Form TS 1. (Regulation 10 B) The issue price of share should be worked out as per SEBI guidelines in case of listed companies. In case of unlisted companies, fair valuation method as prescribed by erstwhile Controller of Capital Issues should be adopted and should be certified by a Chartered Accountant. (Para 5) FDI scheme also stipulates the norms on dividend balancing, whereby the cumulative amount of outflow on account of dividend for a period of 7 years from commencement of production or services should not exceed cumulative amount of export earning during those years. The dividend balancing guidelines are applicable to companies included in Annexure E of FDI scheme and telecom industry is not included in said annexure. (Para 6)

In case preference shares are issued to a foreign investor, the rate of dividend shall not exceed 300 basis points over the Prime lending rate of SBI, prevailing on the date of Board meeting where such issuance is recommended. (Para 7)

The reporting requirement are contained in regulation 9 viz. a) The Indian company should report the details of receipt of consideration to RBI within 30 days of receipt and b) The Indian company should submit report of issuance and allotment of shares in Form FCGPR along with necessary certificates from the Company Secretary and the Statutory Auditor of the Company.

An Indian Company may also issue shares on Rights basis or issue bonus shares (Regulation 6A); subject to compliance of conditions of FDI scheme and sectoral cap.

SEBI Takeover Guidelines

SEBI takeover guidelines called Securities and Exchange Board of India (Substantial acquisition of shares and takeover) Regulations, 1997 are applicable to listed Public companies and hence would be applicable in case of M&A in listed telecom companies like Bharti, Reliance Communication, Shyam Telecom, VSNL, Tata Teleservices (Maharashtra) Limited, etc. These guidelines have been recently amended by SEBI and notified vide SO No. 807(E) dated 26.05.2006.

The highlights of the amendment are as fol-lows:

l No acquirer who together with persons acting in concert with him, who holds 55% or more but less than 75% of the shares or voting rights of the target company shall acquire by himself or through persons acting in concert unless he makes a public announcement as per the regulations. Further, if a target company was unlisted, but has obtained listing of 10% of issue size, then the limit of 75% will be increased to 90%. Regulation 11(2)
If an acquirer who together with persons acting in concert with him, who holds 55% or more but less than 75% of the shares or voting rights of the target company is desirous of consolidating his holding while ensuring that Public Holding in the target company does not fall below the permitted level of listing agreement he may do so only by making a public announcement as per the regulations. Further, if a target company was unlisted, but has obtained listing of 10% of issue size, then the limit of 75% will be increased to 90%. - Regulation 11(2A) l The minimum size of public offer to be made under Regulation 11(2A) shall be lesser of a) 20% of the voting capital of the company; or b) such other lesser percentage of voting capital as would enable the acquirer to increase his holding to the maximum possible level, while ensuring the requirement of minimum public shareholding as per listing agreement.

Competition Laws
Competition Commission of India (CCI), established in 2003, holds statutory responsibility for ensuring free and fair competition in all sectors of the economy. The Competition Act, 2002 has provided for a liberal regime for mergers, whereby combinations exceeding the threshold limits fall within the jurisdiction of CCI. The threshold limits are quite high. Most competition laws in the world require mandatory prior notification of every merger to the competition authority but under Indian law it is voluntary. However CCI can also take suomotucognisance of a merger perceived as potentially anti competitive and it can also enquire until one year after the merger has taken place. Once CCI has been notified, it must decide within 90 days of publication of details of the merger or else it is deemed approved. The CCI can allow or disallow a merger or can allow it with certain modification. Most of the operative provisions of Competition Act have still not been notified.

THE CONTOURS OF M&A IN TELECOM

M&A are also referred as Corporate Marriages and Alliances. Mergers can be across same or similar product lines. In many cases mergers are initiated to acquire a competing or complementary product. A reverse merger is another scenario in taxation parlance where a profit making company merges with a loss incurring company to take advantage of taxshelter.
A horizontal merger (mergers across same product profile) adds to size but the chances for attainment of profit efficiency are not very high. On the other hand a vertical merger (entities with different product profiles) may help in optimal achievement of profit efficiency. Say a mobile operator acquires a national long distance company and thus saves IUC charges. In telecom Industry, most of the acquisitions were horizontal which helped the acquirers to expand the area of their operation and customer base quickly. These provided economies of scale with phenomenal benefit to the acquirers in terms of higher profitability, and better valuations.

Takeovers generally have three typical patterns:

a) In the first model, the investor acquires a controlling stake in the acquired company and retains it as a separate entity. This is the simplest model with the intent to avoid the legal hurdle for merging the company into the parent company. This route also gives the acquirer a flexibility to sell off the operation on a stand alone basis later on, in case the merger is not successful. This mode has been followed by Hutchison, which has retained most of the acquired companies (Usha Martin- Kolkata, Fascel- Gujarat, AircelDigilink Haryana, Rajasthan and UP East, Sterling Cellular- Delhi, Escotel Punjab) as separate legal entities.

b) In the second model, the acquirer merges the acquired company with the parent after acquiring controlling stake. This model requires completion of merger formalities with due approval of High courts and also from DoT. It has the advantage of avoiding statutory compliance for several entities and integrate all operations seamlessly into a single legal entity. This model has been followed by Bharti, which has merged most of the acquired entities with the parent in due course of time.

c) The third model entails purchase of assets of the target company on stand alone basis without purchasing the company as a whole. In some cases, where the licences were cancelled by DoT due to default, such companies sold the telecom assets and customer database to the acquirer, who could easily integrate the same into his existing licence and strengthened his network and customer base at a nominal cost. The seller company which was stripped of licence as well as telecom network was ultimately wound off.

Telecom Service Providers

GSM is the most widely deployed mobile communications technology in India. There are many players offering GSM services in India. Some of the major players are summarized below.

BSNL: BSNL recorded a revenue of Rs 35,296 crore in the last fiscal, down from Rs 40,135 crore in FY 2006-07, a decline of 12.1%. The company is looking at new business streams to increase revenue and reduce losses. BSNL is toying with the idea of entering into managed network services and enterprise business, which will add value to mobile as well as landline. Apart from this the company is also looking at adding IPTV and VoIP services in its portfolio. BSNL would also be investing Rs 15,000 crore for the next three years in a bid to return to its profitable position. Like other service providers, BSNL is also planning to focus on the rural segment in the coming years. BSNL leads the broadband segment, as far as subscribers are concerned. Currently, the company has 2 mn out of the 3.9 mn subscribers in the country. Bharti:BhariAirtel as it crossed the magical figure of 50 mn subscribers in the country. The customer addition has taken its revenue to Rs 26,436 crore in FY 2007-08, clocking 47.8% increase. The company has also formed an alliance with four global IT majors: Alcatel Lucent owned Mobilitec, Germany-based CoreMedia, US-based Adamind and UK's Apertio for its service delivery platform. Continuing with its strategy of focusing on its core business and outsourcing the rest, Bharti signed a $35 mn three-year outsourcing deal with BPO service provider, Firstsource Solutions. Bharti will be launching operations in Sri Lanka later this year and is investing $200 mn for the same. The company also launched its DTH services. Bharti is focusing on the rural and enterprise segments as its growth areas. Reliance: Reliance Communications recorded an increase of 71% in its net profit. And an increase of 28.8% in its revenue, which is Rs 18,638 crore in fy 2007-08. It received start-up GSM spectrum last year. It has huge expansion plans in rural India. It also expanded globally with acquisition of UK-based Vanco and Uganda-based Anupam Global Soft. In a landmark deal, Reliance partnered with Microsoft to deliver IPTV in India on the latter's mediaroom platform. Reliance Communications will have the exclusive deployment rights for the platform in India. Vodafone: Vodafone Essar achieved 46.5% rise in telecom revenue in India with its income from operations touching Rs 15,477 crore in FY 2007-08, up from Rs 10,565 crore in the previous financial year. Vodafone entered India through its acquisition of Hutchison Essar stake. Tata Communications: The Tata-run VSNL created a significant landmark when it announced financial results for the last fiscal-an astounding growth of 85%, to touch Rs 8,857 crore. VSNL's transformation has helped it lead in segments such as wholesale voice, wholesale and enterprise data, and retail broadband; and ensured global infrastructure and global customers.

Telecom Equipment Players The top equipment players in the Indian telecom space are Nokia, Ericsson, Nokia Siemens Networks, Alcatel-Lucent, Cisco, Sony Ericsson, Huawei and ZTE.

Recent trends
The world in the last decade has seen a boom in the number of mobile subscribers. Fixed line subscribers on the other hand have remained more or less flat or down with some increase in the developing markets. Figure below shows that the trends of fixed telephone lines in the period 1997-2007.

Source: International Telecommunications Union : Market Information and Statistics (STAT)vi

Mobile subscribers on the other hand have increased exponentially reaching a penetration of 49 per 100 inhabitantsworldover. Mobile penetration in India is currently around 35%.

Source: International Telecommunications Union : Market Information and Statistics (STAT)vii Internet has caught on in the developed world with penetration reaching 62 per 100 inhabitants in 2007. However, in the developing world internet penetration is still abysmal. In 2007, only 17 per 100 inhabitants had used internet on an average.

Future opportunities
3G &WiMax Auction of spectrum for 3G services is slated for Jan 2009. 3G offers opportunities for new players to enter the booming Indian telecom market. Better spectral efficiency and high speed data services are some of the advantages that 3G has to offer. However, high license fee, handset costs, and low acceptance rate among consumers may dampen the hype. WiMax offers high speed data connectivity in a radius of upto 50km. It is attractive not only for providing broadband access in urban areas but is also touted as a technology that can bridge the digital divide by providing broadband access in rural areas without the high costs associated with laying cables. Major differences between 3G and WiMax: WiMax offers better spectral efficiency through OFDM and multiple antenna support. It offers higher peak rate It offers variable channel bandwidth on uplink and downlink. It also allows for symmetric uplink and downlink to support T1 services. 3G only supports asymmetric uplink and downlink. 3G has better mobility support. WiMax mobility is an add on feature and is unproven.

Vodafone acquisition of Hutch

In Feburary 2007, British telecom giant Vodafone has bagged the 67% Hutch Telecom International (HTIL) stake in Hutch-Essar at an enterprise value of $19.3 billion (approxRs 86,000 crore). The acquisition provided Vodafone with access to the lucrative Indian mobile market. The deal has been in the news lately due to the income tax (I-T) department notice to Vodafone-Essar asking why capital gains tax on the $11.1 billion deal should not be levied on the company. The same is being contested in courts. In December 2008 the Bombay High Court dismissed the petition by Vodafone International Holdings against the tax bill relating to the purchase. Vodafone has moved the Supreme Court challenging the Bombay High Court order upholding a show-cause notice issued by the Income-Tax Department asking the telecom firm to pay $2 billion post its acquisition of Hutchisons stake in Hutchison Essar. The order raises cross-border M&A taxation issues that firms need to be aware of. Vodafone contended that its Netherlands arm had acquired shares in a Cayman Islands company (which in turn held shares in Vodafone Essar) from Hong Kong-based Hutchison Telecom: and that all the companies being overseas ones, Indian revenue department had no jurisdiction in the matter. Vodafone s argument that its international company had merely acquired a Cayman Islands company which in turn held shares in the Indian company was not accepted by the court which said it found this argument too simplistic. It held that Vodafones basic objective appeared to be acquisition of a business interest in India.

Idea Cellular takeover of Spice Telecom

On 25th June 2008 the country's fifth-largest mobile operator in terms of subscribers, Idea Cellular announced the acquisition of B K Modi-owned Spice group's 40.8 per cent stake in Spice Communications for Rs 2,716 crore. Idea acquired the stake at Rs 77.30 a share. The Birla group company, Idea Cellular said it would merge Spice with itself through a share swap where Spice shareholders would get 49 Idea shares for every 100 Spice shares held. It will also pay an additional Rs 544-crore as non compete fee.

Idea Cellular Overview

Idea Cellular, the leading GSM mobile services operator has licenses to operate in all 22 service areas of India with commercial operations in 11 service areas. With a customer base of over 26 million, it runs operations in Delhi, Himachal Pradesh, Rajasthan, Haryana, Uttar Pradesh (East), Uttar Pradesh (West) & Uttaranchal, Madhya Pradesh &Chattisgarh, Gujarat, Maharashtra & Goa, Andhra Pradesh, and Kerala, holds spectrum for Mumbai, Bihar, Orissa, Tamil Nadu (including Chennai), and Karnataka, and licenses for the remaining six service areas. With the planned launch of services in Mumbai, Bihar and Jharkhand in Q3 2008, and Orissa and Tamilnadu (including Chennai) towards the end of the calendar year, Ideas footprint will soon cover approximately 90% of Indias telephony potential. Idea is listed on the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE) in India. Idea Cellular is a part of the US $ 28 billion Aditya Birla Group. The group has a market cap in excess of US $ 31.5 billion, operates in 20 countries, and is anchored by 100,000 employees belonging to 25 nationalities.

Spice Telecom Overview

Spice Telecom is the brand name of Spice Communications Limited, a mobile phone service provider in India. Spice Telecom was operating in the states of Punjab (India) and Karnataka i.e., in 2 circles of 23 Telecom Circles of India. Spice Communications Limited was promoted by DilipModi of ModiWellvest Private Limited, which owned 40.80% of the company. Telekom Malaysia Berhad owns 39.20% through TMI India Limited, Mauritius. TMI India Limited is a wholly owned subsidiary of TM's international investment holding company TM International SdnBhd (TMI). Spice was incorporated as Modicom Network Private Limited on 28 March 1995.as.a.private.limited company. Spice subsequently became a deemed public company under Section 43(1A) of the Companies Act, 1956 of India with effect from 1 April 1999 and its name was changed to Modicom Network Limited. Spice assumed its present name via a fresh Certificate.of.Incorporation.dated.3.December.1999.With.the addition of the word Private in Spices name under Section 43(2A) of the Companies Amendment Act,

2000 of India, Spices name was changed to Spice Communications Private Limited with effect from 28 October 2003. On 28 December 2006, Spice was converted into a public limited company.and.assumed its present name. Spice currently offers mobile telecommunication services in the Punjab and

Karnataka states of India. As of 30 April 2008, Spice had 4.4 million subscribers representing a 1.7% market share in India, and was the second and fifth largest mobile telecommunication service provider within the Punjab and Karnataka circles, respectively. Spice was listed on the Bombay Stock Exchange Limited on 19 July 2007, and on the National Stock Exchange of India Limited on 16 June 2008. Refer to Exhibit 8.2 for financial results summary of Idea Cellular.

Synergies Anticipated
This deal gave Idea Cellular another 44-lakh subscribers of Spice Communications in Punjab and Karnataka circles in addition to own 2.6-crore subscribers in 11 circles. The acquisition of Spice gives Idea the much needed headway in Punjab and Karnataka states that account for more than 10 per cent of Indias wireless subscribers. It will give us incumbent advantage in both these circles, said Mr. Kumar Mangalam Birla, Chairman, Aditya Birla Group. We are now in the big league of telecom players in the county, added Mr. Birla. Idea Cellular would get hold of crucial spectrum of licences recently got by Spice for operations in four more circles including Delhi, Tamil Nadu and Andhra Pradesh. The primary benefits of this transaction are: Idea gains entry in the contiguous wireless markets of Punjab and Karnataka, which account for 11% of Indias total wireless subscribers. Spice, a pioneering operator, delivers a strong running start in Punjab and Karnataka.

Idea to consolidate its position with its all-India subscriber market share increasing from 9.5% to 11.1%. Importantly, Idea would be No.1 in 3 service areas, in the top 3 in 5 more service areas, and with a rapidly improving share in all its other operating service areas. Ideas operations in the 900 MHz GSM spectrum band will increase from the current 7 service areas to 9 service areas, driving scale economies and operational synergies resulting in lower operating and capital expenditure. TMI, an emerging leader in Asian telecommunications with over 44 mn subscribers and a presence in 10 countries, will grow its presence in the Indian telecom sector and become a substantial shareholder in Idea. The primary benefits of TMIs investment into Idea are: Idea is currently rolling out operations in Mumbai, Bihar, Orissa, and Tamil Nadu (incl. Chennai)service areas, and will also roll out in the remaining service areas of Kolkata, West Bengal, Assam,North East and J&K, after receipt of spectrum. This investment will support Ideas aggressive growth plans.

 Idea and TMI will develop areas for business co-operation to leverage TMIs strong presence in 10principal Asian markets, including neighboring countries like Sri Lanka & Bangladesh where TMI is a market-leader. TMIs experience of operating 3G in similar markets will be of value to Idea, as also the convergent interests of the 2 companies in areas extending from international traffic to roaming, to mobile value added services etc. Idea and TMI would sign a Business Cooperation Agreement to this effect. Mr. Kumar Mangalam Birla, Chairman, Idea Cellular Limited said: This announcement marks a major step in the Aditya Birla Group s telecom business. Idea has performed strongly, but I believe its best lies ahead. Idea will benefit operationally by leveraging synergies with TMI which will be a significant shareholder in our Company. Further, I look forward to welcoming colleagues from Spice into the Idea family, and indeed the over 100,000 strong Aditya Birla Group. Together we aim to grow a top class organization in the service of our subscribers. Mr. Sanjeev Aga, Managing Director, Idea Cellular Limited said: The strategic import of this move travels beyond Punjab and Karnataka. By the end of the year the Idea yellow will increasingly colour the Indian landscape. In addition, the resulting infusion of funds from TMI will capitalrequirement for (Rs 7300 crore) will support the

Expansion from 11 service areas to PAN India by CY 09. Capex plan of ~Rs. 65bn for FY 08-09 and ~ Rs 60bn for FY09-10 for existing service areas and newlaunches (excluding 3G)

Deal Structure
The takeover deal was a complex one. Idea will acquire the Modis 40.8% stake in Spice (for Rs 2,720 crore) at Rs 77.30 per share. According to the complex agreement, TM International (TMI), the Malaysian telecommunication giant holding 39.2 per cent stake in Spice, will swap its stake for Idea shares and will be offered 469 million shares by way of a preferential allotment of shares in Idea at a price of Rs 156.96 a share. This will take TMI's stake in idea to 14.99 per cent. TMI will invest Rs 7,500 crore for buying this stake in Idea Cellular and a part of these funds will be used to buy Modi's stake. The balance Rs 4,500 crore will be used to retire the debts in Idea's books, Birla said. TMI will get one seat on Idea's board. Spice holding structure before the acquisition was: 40.8% Modi Group (Promoter) 39.2% TMI 20% Other public shareholding

Spice holding structure as of today is (Refer to Exhibit 8.1 for details): 49.9% Promoter Group including Idea Cellular 49.0% TMI 1.1% Others (Public)

Current Idea holding is as follows (Refer to Exhibit 8.3 for details): 49.13% Promoter and Promoter Group 14.99% TMI 35.88% Other public shareholding including institutions

Planned Merger Idea Cellular has said it would merge Spice with itself through a share swap where Spice shareholders would get 49 Idea shares for every 100 Spice shares held. However at the current (Feb 12, 2009) price levels: Spice Communication Stock Price = Rs 77.0 Idea Cellular Stock Price = Rs 49.15 At current prices, Spice Communications shareholders will lose when the share swap happens. One reason for the high price for Spice could be that only 1.1% of its shares are currently floating and news reports suggest a lot of speculative buying and selling is happening.